Bear markets get a lot of attention. The market meltdowns of 2008/9, 2000 and 1987 are the subjects of many hundreds of books. And a good thing it is. Learning from history, and then preparing your portfolio to survive and prosper through dysfunctional markets, is a fundamental weapon in the long-term investor’s armory.
But most of the time markets are not dysfunctional. Over the past 200 years, the US stockmarket has, on average, risen seven years in 10. And only one year in 20 have investors suffered a loss of more than 20%.
So the market we are in at the moment – one of generally rising prices – is normal rather than exceptional. And successfully navigating the good times is as important as handling the bad.
Hence the topic of our recent webinar – Investing When Animal Spirits are Running (see the 30 minute presentation in full below).
The three pieces of advice we give are: avoid getting caught up in speculative madness (see Stockmarket Mania Taking Hold); where possible, stay invested; and hold elevated levels of cash if necessary. Granted, two of those pieces of advice run counter to each other. It’s not meant to be easy.