In his recent presentation, Ken Fisher debunks the myth – one bear market and you’re done. Here’s an excerpt from the presentation:
Fisher: On June 13th we officially entered a bear market by closing below 20% off the highs in January.
In that a lot of people say boy oh boy if it’s a bear market it’s got to get a lot lower, and oh by the way a bear market can destroy my entire retirement.
Well that’s actually pretty ridiculous if you stop and think about it!
You agreed cannot control stocks. You cannot control where they go. You can control yourself, and yourself is about all you can control, in that the long-term history of the stock market includes all bear markets ever.
There have been a few very long ones, but only a few ever, mostly compared to your retirement they’re not very long. A year to two at the most. Some of them shorter yes, some of them longer, but even there as long as you control yourself, your expenses and your propensity to want to sell out at the bottom, there’s no irreparable harm.
It’s the feature that people don’t think through which is that the volatility of stocks, which includes the negative volatility that they dislike, coupled with the positive volatility that comes on the other side of a decline, of a big decline.
That volatility is exactly central in economic theory to why stocks have that long-term superior return. The fact is we have a very long history of stocks, we have a very long history, and in that there has always been this notion that one big bear and I’m done and it’s never been true, never.
You can watch the entire presentation here:
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