It is natural for investors to be concerned with investment portfolio performance during declining markets. But fears of further declines and market volatility often lead investors to make the wrong decision, at the wrong time, for the wrong reason. This can result in many investors pulling money out of the stock market after absorbing much of the decline. But then they risk missing the subsequent rebound after a bear market, which historically has been very robust.
On average, during the past nine bear markets, the market declined substantially as the economy contracted. But stock market returns were quite substantial in the subsequent year, followed by lesser returns in the two years after that. This dynamic showcases the importance of being in the market to experience those recovery returns when the market does rebound.
*S&P 500 Index is an unmanaged index of 500 common stocks of large U.S. companies, weighted by market capitalization. An investment cannot be made directly in an index and an index does not have fees. All indexes are unmanaged.
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