Stock Market Pullbacks are Normal - October 17, 2018
A swift pullback in stocks is never fun, but seasoned investors know they aren’t unusual. Since 1950, the S&P 500 Index2 has experienced corrections on a regular basis.
The S&P 500 Index has fallen 6.9% from its closing peak on September 20th to the most recent low on October 11th (St. Louis Federal Reserve as of 10.15.18).
Since the market’s bottom in March 2009, the S&P 500 Index has dropped by 5% or more 23 times (Pension Partners).
The 832-point decline in the Dow Jones Industrial Average1 last week is a headline grabber. Given a Dow that’s over 25,000, large one-day declines will become more frequent.
But last week’s one-day drop of 3.15% didn’t crack the top 250 as measured in percentage terms (MarketWatch, FactSet).
Long-term investment plans take selloffs into account. They aren’t designed to time the market and they don’t eliminate risk. But they provide a roadmap to one’s financial goals and help eliminate the emotional component that may cause even the most disciplined investor to make rash decisions.