A Longer Investment Horizon Means More Market Downturns

Here is a simple fact of investing that you need to be comfortable with.

The longer time you have to invest, the more downturns in the market you will see.

Most of us will be investors for the remainder of our lives. For the young people reading this, that could be 70 years or more. The average time between bear markets in the US stock market has been 3.9 years.

A 50 year old who lives to 95, could live through 11 market downturns of 20% or more! Clearly, that won’t be easy.

There are several options for handling these downturns: learn to deal with the emotional roller coaster, invest more conservatively, or have an active strategy like AMF’s Tactical Trend Following strategy in place.

Let’s look at what each of these options requires.


Number 1 – Use a standard asset allocation strategy and learn to deal with it.

This investor relies on common knowledge that when stocks go down, bonds go up and vice versa. They think they are protected from the market downturns, but a common 60/40 portfolio lost 27% over 16 months during the US bear market of 2007-09. Living through repeated drawdowns will scar this investor emotionally and make investing more stressful as the years go by.

Number 2 – Hold mostly CDs and cash.

Those trying to avoid the market downturns by holding a lot of CDs, bonds and cash are in for future trouble. It’s true you won’t experience the stock market downturns, but you may not be aware of the future risks. The cost of living continues to go up every year. Prices of food, gas, healthcare, college education and most everything else are currently going up much faster than the interest available from a CD or safe bond. By investing very conservatively, you will not keep up with inflation. That means a downgrade in lifestyle is inevitable.

Number 3 – Implement an actively monitored plan for handling market fluctuations.

Andrew Marshall Financial believes this is the best way to achieve investing success. With AMF managing your accounts, your investments are monitored and adjusted on a timely, systematic basis. AMF’s Tactical Trend Following system moves investments to assets with increasing value, allowing investors to sidestep the market drawdowns. By avoiding the inevitable bear markets, the emotional stress of investing is greatly reduced and you are more likely to live the lifestyle you desire.

A Longer Investment Horizon Means More Market Downturns