The investment world recently observed a milestone: the longest bull market in history. But what does this mean to you, as an individual investor?
For one thing, it suggests that patience and perseverance can pay off. From October 2007 to March 2009 – just 17 months – the S&P 500 stock market index fell more than 56 percent. That’s a big drop, of course, but what if you had told yourself that “enough is enough” and you decided to sell ? Consider this: The S&P 500 has now risen about 320 percent since its low point on March 9, 2009. So, if you had stayed invested during these last 9-1/2 years, your portfolio might have achieved impressive results.
How long will this bull market last? No one can say for sure, and it’s usually something we don’t anticipate that ends a bull market. (In fact, there’s no one agreed-upon definition of a “bull market,” although many financial experts define it as a period of rising stock prices without a drop of at least 20 percent.) Right now, the investment environment still looks pretty good: U.S. economic growth is strong, corporate earnings are healthy and consumers are spending. As always, though, potential concerns lurk, including the effects of a looming trade war with China.
Regardless of the prospects for this bull market, here are some questions to ask yourself:
Am I still on track toward meeting my goals? Your investments’ performance may not match that of the S&P 500 or the Dow Jones Industrial Average – and that’s not a problem. These indices only track the returns of U.S. stocks, but to reach your goals, such as a comfortable retirement, you will likely need a diversified array of investments: U.S. stocks, international stocks, bonds, government securities and so on. Rather than compare your investment results to those of a single market index, you should measure your progress by your own “yardstick,” based on a variety of factors, including your portfolio’s performance but also taking into account your age, retirement goals, risk tolerance and family situation. A financial professional can help you create a personalized measurement tool.
Do I need to rebalance? Over time, your investment portfolio can become over-concentrated in some areas. For example, you might have wanted a certain percentage of your portfolio to be held in stocks, but during a long bull market, the value of U.S. stocks may have risen so much that they now take up more space than you had intended, possibly subjecting you to a higher level of risk. Consequently, you may need to “rebalance” your portfolio by adjusting your investment mix.
Am I maintaining a long-term perspective? The 9 -1/2 years (and counting) run of the bull market should remind you that successful investing is not a “get-rich-quick” endeavor, but rather a gradual process requiring you to focus on the long term. Even during this lengthy run-up, we’ve seen “corrections”– short-term declines of 10 percent or more. But if you can stick with your long-term investment strategies, you will be less tempted to over-react to the inevitable bumps along the road. The record bull market makes for some interesting headlines for a few days – but in the long run, it’s what you do, year in and year out, that will help you write your own story.
This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.