BULL ANO BEAR MARKETS SINCE 1946
6M-mont,h s "-'n'""''" 19 MOAW 21 Mol'lllls -29" --43" 4 11%
Soorce: Mol'nil'fiSbr Oirtct as of 12/31/19. Returns based on the S&P SOO Index. This chart shows the M1orical ptttormanced bull and tar market$ and excludes permance of periods between those martels.
··- 451-3-11 11.l"k. S/31/1~6 12/31/1953 12/31/1900 12/31/1967 12/31/1974 12/31/1981 12/31/1988 12/3U199S 12/3l/2002 12/31/2009 12/3l/2019
Tft = Total A:etutn An. = Annualized
2. Eggs do better in many baskets
Think you can forecast which types of investments will outperform others from year to year? Think again. The fact is, the list of winners and losers changes every single year. For example, in 2012 and 2014 global real estate1 was the top performer among nine stock “asset classes” (up 28.7% and 15.9% respectively). But in 2008, when the U.S. housing market collapsed, real estate was the worst performer, down a stomach-churning 47.7%.
The moral: diversify. Invest in a wide range of assets based on your time horizon (how long until you’ll need your money) and risk tolerance (how well you handle the market’s ups and downs). It won’t guarantee profits or protect against losses. But it will help ensure that trouble with certain investments won’t affect your whole portfolio.
3. Emotional decisions are usually bad ones
Everyone wants to “buy low” and “sell high.” The problem is, most investors get caught up in the heat of the moment—and end up doing the opposite. That can create a vicious cycle of “herd investing”—following what others do, even if it means going over a cliff. This illustration shows what might go through your mind as the market rises and falls.