Is this just a painful prelude to profits?
The brutal selloff on Monday left the Standard & Poor's 500 firmly in correction territory. It was down 4.33% over the past five days and is now off by 8.60% year to date.
We had all gotten a bit spoiled after so long without any major downturns. 2010’s decline was a sharp one but didn’t last too long timewise. The damage was done in under three months, from late April through early July.
The summer-fall plunge in 2011 looked eerily similar to this year’s. It illustrates the wisdom of waiting with your portfolio or adding to good quality names while they are cheap.
In the midst of declines, trends seem to drag on interminably. In reality, they typically play out over months, not years.
Human nature is hard to fight. Many people optimistically hold on for quite some time only to cave in to fear and sell, often very close to when stocks are ready to start climbing again.
Perhaps the following chart will help you make the right choice when emotions are running hot.
