A well-diversified portfolio will typically move in tandem with the broader stock market, deviating slightly depending on the unique makeup of the individual stocks chosen in each sector across the board.
Investors looking to place their hard earned money in the market to watch it grow will undoubtedly be dinged during recessions and corrections that are natural, and will continue to impact markets moving forward.
With the current bull market now approaching one of the longest in history, investors worried about a potential correction or recession on the horizon may consider taking their money out of the market. This, however, may not be the best long-term strategy to maximize returns and continue to grow a nest egg over time.
One time-tested strategy which has typically outperformed other investment methods (though not always) is dollar-cost-averaging. Buying the same amount of a given security in the same frequency over a long period of time will allow an investor to buy more of a good company on the way down in a bear market, and continue to take advantage of the company’s upside on the way up in a bull market.
Picking good companies is the key to any successful long-term investing strategy, and for investors with a time horizon of decades, buying a good company today, tomorrow, or one year from now shouldn’t matter in the grand scheme of things, assuming this company will generally trend upward over time.
Instead of trying to time the market, a better strategy may be to dollar cost average. After all, a market correction or recession can be viewed as an industry-wide discount fire sale; a wise person once told me “the stock market is the only market which nobody wants to buy at a discount.”
Invest wisely, my friends.
