Between February and March 2020, the stock market dropped dramatically as the S&P 500 index fell over 30 percent due to growing concerns of COVID spreading across the globe. This sudden financial collapse reminded many investors, including the team at Argentum, of the global financial crisis of 2008, where a volatile market left plenty of uncertainty. Once countries started to make headway to ease the spread of Covid-19, the market has seen an upturn into recovery.
We can learn from these events that a Bear Market is no cause for panic but an excellent opportunity for investors. To help ease your stress in times of severe volatility, consider these four important lessons that will see you through market high:
Lesson 1: Corrections are Normal – You Should Expect Them
Corrections are a normal function of how the financial market operates, and although no one can predict when they will occur, it’s best to prepare for them. Every time the market takes a hit, investors are surprised and often panicked by it, even though there have been many bear market corrections throughout human history.
While a bull market can last for an extended period, there will always be a time when the bear market emerges, and when it does, it’s important to remember that it won’t last. In general, the bull market’s upturn will more than make up any losses sustained from a market fall.
Changes in market pricing are how investors make money from the capital markets. We need market corrections the same way a farmer needs to leave a field fallow to grow crops.