“Markets take the stairs up and the elevator down” is one of the first lessons learned in the self-study course that is Behavioral Finance 101.
Progress and the climb up tends to feel slow and hardly noticeable, while drops tend to happen more quickly inducing feelings of uncertainty, fear, panic, and a race to the emergency exit.
Patience and perspective are crucial to successful investing, though. Take the graphs above, for example.
Graph #1 (above, top) shows the return of the US stock market (S&P 500 Index) over the last 12 months. If you watched the markets or listened to the news at all over the last 12 months, there were plenty of reasons to feel uncertain or fearful or even panicked to the point of racing for the exit. Truth is these past 12 months have been a pretty typical representation of the “normal” market journey. Up, down, up, down some more, then a slow steady climb back up. It can feel like a roller coaster if you watch it every day.
However, if you change your perspective and zoom out a little, a much different picture is painted. Graph #2 (above, bottom) shows the return of the US stock market (S&P 500 Index) over the last 10 years. The roller coaster ride becomes much more steady and much more palatable.
Markets will go down. EVERY investor will feel the urge to want to head for the exit, but markets are resilient in the long run. The markets reward the patient investor who can look past the choppy waters beneath them and keep their eyes focused on the horizon.