How low will it go!

The question on everyone’s mind is how low could this market go. Is this a correction/bear market? Since 1966, the market has corrected by 20% 22 times and in those times only 4 times has it gone lower (or turned into a bear market). Now, what are the odds that it goes lower? What this means is that we have a 18.8% chances of this being a correction/bear. This does not mean, though, that it can’t go lower. We are talking probabilities!

Looking at the market simply

By looking at the market simply, we know that the market itself will correct itself. How much and when? No one knows for sure. If we plan ourselves and keep our emotions in check, it will be very rewarding in the long run.https://gettingrichsimply.com/wp-admin/post.php?post=27&action=edit So where are the points we could start to look at getting in. The highest point of the S&P 500 was 2940.91. The bear markets we have seen in the past have corrected -21.8%(1946),- 22.3% (1962), -29.3% (1969), 29.6% (1987), -42.6% (1974), -44.7% (1997), -50.9% (2008). Let’s translate these numbers into potential levels on a S&P 500 chart.

If the highest point was 2940.91, and the market corrected -21.8% then we would have a S&P 500 of 2299.79. Now the market makes another correction from the 2940.91 of -22.3% that would be 2285.09. Another correction of -29.3% would be 2079.22 or a correction of -29.6% would be 2070.40; a correction of -42.6% would be 1688.08; a correction of -44.7% would be 1626.32 and if there was a correction of -50.9%, we would have a S&P 500 of 1443.99. You call these levels, entry levels.

Am I losing money?

Often I hear people when the market corrects say, “I’ve lost money”. This is a misrepresentation of their portfolio. You don’t lose money until you sell. The advantage of having your money in the stock market is you have access to your money almost instantly. The disadvantage is that you have an instant evaluation. This is what makes people panic and make bad decisions. If you have an Index fund or a fund that represents the market, you shouldn’t worry about it until you need it. That, however, is another subject to be discussed at a later post.

If you have a house, you certainly don’t check with a realtor to see how much it’s worth every month. The same applies to your portfolio.

Looking to the past to decide for the future for corrections/bear markets

As we have looked to the past, we have seen corrections and bear markets, so now we cans see probabilities of corrections or bear markets. Therefore, we plan according. By this, I means if the market corrects 21.8% invest a certain percentage and if it corrects to another level, say, 29.3%,invest another percentage and so on. You get the idea!

What to expect

When you realize that the market will go up but also correct itself, you suddenly realize the importance of getting richsimply. Markets will fluctuate. As they say, “the best surprise, is no surprise.” Expect that in a correction/bear market prices will fall and that know one can predict the precise bottom to any market.

What to do

This is the hard part. Patience in getting rich simply is a key component. Do not and I repeat do not invest all your money at one time. As noted above, divide your money into portions and invest accordingly. This is also known as money management.

Conclusion

So let’s summarize. In a correction/bear market:

• Look to the past to see where and when to invest
• Make a plan
• Invest incremently
• Have a long term vision
• Patience
• Have fun

Please leave a comment or any suggestions you may have.