Don't Worry, Be Happy

I have always tried to explain to people that no matter what economic, political, or war-related catastrophes happen in this world, the market will always act as a market. For every bear market, there is a longer and stronger bull market. This is always true. Always.

Whenever we go through a bear market, people seem to think that this is ‘the one’, the bear to end all bears. If this was true, then we would have been fighting it out in the thunderdome a long time ago. The only reason why people have this mentality is because of the magnitude of the drops. They are very violent, whereas bull markets are just steady and long.

I found this chart this morning which proves my position. This is a chart from a major funds company, so the data is good. As you can see, bear market hit hard and quick, which leads to people thinking that the world is going to end. The resulting bull market is always very prolonged, and amounts to a full doubling of invested capital.

When put into this perspective, long-term investors should have two goals: One, stay disciplined. Whether times are good or bad, realize that the market will generally go up more than it will go down. Two, don’t be afraid to jump in and buy. Whether you think that now is the bottom of the bear market, or you think it could go another 10-15%, jump in a buy, your returns over the next couple of years will show you made the right choice.

I hope this helps people who are nervous.

(Click chart for bigger version)

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