When the markets dip, it can feel like a punch to the gut.

It can be tempting to cut your losses and get out, if only to slow the tide of anxiety that can come from watching profits tank. Hearing about others who are bailing can make it even tougher to weather the storm.

Am I making a mistake by staying invested?”

Almost always, the answer is: no.

Over the last 35 years, global stocks on the S&P500 have returned 11.46% annualized.

That may not sound like massive returns, but keep in mind that number includes:

The Black Monday Crash from September to December of 1987: a 23.9% drop

The Tech Meltdown from April 2000 to October 2005: a 47.4% drop

The Financial Crisis from November 2007 to March 2009: a 55.2% drop

The most recent dip happened during the pandemic. The market dropped 33.7%, and then just four short months later rebounded 75%.

All of those crashes were substantial. For investors at the time, they were likely anxiety-inducing. And yet, for those who stayed invested… they still came out significantly ahead.

It pays to stay invested.

And that means staying in the market, not selling and then re-entering the market when things start to turn around.

Because market rallies are often measured in days, selling during a downturn and trying to re-enter on an upswing can mean you miss out substantially.

For example, an initial $10,000 investment would have been worth $445,826 after that 35 year period mentioned above.

Missing even the best five days means that portfolio would have been worth $188,399 less.

Missing the best thirty days means that portfolio would have been worth $389,877 less.

Missing even a few of the “best” days can have a lasting impact on your portfolio.

But sticking it out while it feels like everything is bottoming out can be difficult emotionally.

So how do you have the confidence to stay the course?

A balanced portfolio can help give you the confidence you need to stay invested during a downturn.

Stocks have the potential to give the biggest returns, but also the biggest risks. Bonds are much more stable, but typically have a lower rate of return. Investing only in one or the other makes you much more vulnerable to the whims of the market.

During the financial crisis, stocks on the MSCI World Index dropped 32%. Bonds, on the other hand, gained 16%. A portfolio made up of a balanced allocation between the two, therefore, lost only 16%.

Does that mean investors would have been better off investing only in bonds?


Why? Because during the subsequent rebound (and there are always rebounds!), bonds lost 3%, but a balanced portfolio gained 14%.

Overall, a balanced portfolio mitigated losses during a substantial market fall, and still afforded significant gains during an upswing. A balanced portfolio can give returns that are competitive with stocks, but because of the bonds component – it does so with far less risk.

But what about right now, when both stocks are bonds are down? The last time both stocks and bonds were down was 1994, but to this degree - 1976!  So is it time to panic.

It isn’t.


Because the market WILL recover.

There is a war (a world event that affects equities) AND an inflation problem (that affects fixed incomes/bonds). The Bank of Canada is increasing interest rates to slow spending and bring prices down. That will affect the value of bonds. Stocks are tied to the uncertainty that a war brings.

But it will not stay this way forever. Just looking back at data over the past 30 years can easily show us that.

Knowing this - seeing this kind of hard data - can help alleviate anxiety when the markets dip. Humans are emotionally motivated people. It can be tough to resist reacting emotionally, especially with so much riding on your investments.

Part of the benefit of having a Certified Financial Planner ® is having someone you can contact if you’re feeling skittish.

Want to make sure you have a portfolio you can feel confident in?  Book a call.