When will stock prices recover?  3 things to know |  Personal finance

When will stock prices recover? 3 things to know | Personal finance

(Katie Brockman)

The stock market has seen a crash recently, as prices continue to fall. the S&P500 is down more than 16% since the start of the year, and the Nasdaq officially entered bearish territory after falling almost 25% over the same period.

If you have money tied up in the stock market, it can be disconcerting to watch your portfolio sink day after day. But how long could it be before stock prices start to recover? There is no simple answer to this question, but there are a few things to keep in mind.

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1. The stock market is unpredictable

No one knows for sure how the stock market will perform in the coming weeks. Some experts predict that it could be months before the market starts to rally, and until then stock prices could continue to fall.

That said, it’s impossible to know exactly what will happen. Past performance is not necessarily indicative of future results, and this downturn may not play out like previous crises. This means that even experts cannot predict with 100% certainty how long this downturn will last.

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2. A long-term perspective is essential

While no one can say exactly what will happen with the market in the short term, there is more certainty when it comes to its long-term performance. The stock market has seen dozens of corrections and crashes over the years. In fact, the S&P 500 has fallen at least 20% 21 times since 1929. That’s a big drop about every 4.5 years, on average.

In other words, seizures like these are normal. More importantly, however, they are temporary. While there are never any guarantees when it comes to investing, it is extremely likely that the market will also recover from this downturn.

While it’s uncertain how long this downturn will last, maintaining a long-term perspective may make it more tolerable for investors. No matter how bad things may seem, they will eventually get better.

3. Slowdowns aren’t all bad

To be clear, stock market declines are hard to bear and it’s completely normal to worry about your investments. However, there is an advantage: investing is much more affordable.

When the market is down, stock prices are lower. This means it can be a smart opportunity to stock up on quality investments at a fraction of the price. If the price of a particular stock has fallen by, say, 25%, rather than thinking it’s lost 25% of its value, think it’s back 25%.

Because market declines are temporary, the majority of stocks will see their prices rebound. By investing now when these investments are essentially in liquidation, you will reap the rewards when the market inevitably recovers.

While it can be nerve-wracking to throw more money into the market when prices are falling, keep in mind that even famed investor Warren Buffett doesn’t fear downturns because they are opportunities to buy. At a reduced price. As he says, “Opportunities seldom come. When it rains gold, pull out the bucket, not the dice.”

The stock market has had a tough year and no one knows for sure how long it will be before prices start to rebound. By focusing on the long term and trying not to get too attached to daily movements, this volatility will be easier to tolerate.

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