Welcome back to Powering Your Retirement Radio. In this episode, I discuss the three items mentioned in the article at the bottom of this post.
The TLDR answer is nobody knows how it will end, but it doesn’t mean people won’t try to predict it. The key is to focus on what is controllable.
What are the three common reasons Bear Market’s reasons end?
1) Individual investors throw in the towel – Capitulation. While it does happen, there are many occasions that it has not happened.
2) Fear hits a high – measured by the VIX (CBOE Volatility Index). In 2009 the VIX was close to 80, and in 2020 the VIX hit the high 60’s. In the 2008 – 2009 bear market, the market fell another 19% after the VIX peaked.
3) Stocks have to get cheaper – P/E Ratio. In 2008 – 2009 stocks hit a low of 13x Long Term Earnings. That is roughly 20% below the long-term average.
Some people believe doing nothing is the right thing to do. Sometimes it is the right thing to do. Sometimes it isn’t. As I said earlier, you have to control what you can control.
Adjusting your portfolio sometimes makes sense. Sometimes being consistent and Dollar Cost Averaging is the way to go. However, now is not the time to make radical changes. In a retirement account, almost nobody needs all their money at one time.
The best way to ensure your account is correctly allocated is to confirm your risk tolerance and that your investment still matches.
Remember, stay calm and adjust if needed.
Please consult your financial advisor and tax preparer before making any changes to your portfolio.
The article referenced was by Jason Zweig, entitled “You Can’t Predict When Bear Markets End. So Don’t Try”
This is a link to where it should appear, as of today (7/12/22) the website only shows articles until 7/8/22, and the article appeared on 7/13/22.