Should I Sell When the Market Tanks?

Every movie ever made has the same basic beginning, middle and end.

In the first 10 minutes, our hero is blissfully ignorant of the trouble that awaits before… her son is kidnapped…. his love leaves him… people declare Santa Claus is nuts.

For the next hour and 50 minutes, you watch our hero attempt and fail to…. track down the kidnappers… win back the girl… prove that he really is Santa Claus.

Then in the climactic last 20 minutes, our hero emerges battered but victorious. Cut to the last scene as our hero…. hugs her child…. embraces his lost love…. dumps thousands of letters addressed to Santa Claus on the judge's bench.

As the moviegoer, we're safely along for the ride. The dramatic 110 minutes in the middle doesn’t scare us. We know how the movie will end. We've seen other movies just like it a bazillion times before.

Most of us haven't seen a bazillion movies about the markets though. So when the market tanks, we might panic and walk out of the theater before the climactic happy ending. If only we knew how it would end….

Did you know the market is down 5% three times per year on average?

Did you know the market is down 10% once a year on average?

Did you know the market is down 20% every 3-5 years on average?

And yet, over the last 100 years, the average annual return is 10%. Connect those dots, and you'll see that despite all the drama in the middle, it always ends well.

You just have to sit in the theater long enough to get to the climactic, happy ending.

DISCLAIMER:  This publication is for educational purposes only and should not be considered financial, tax or legal advice.  These statements have been simplified for illustration purposes.  Consult your financial planner or tax advisor for help with your specific situation.