We're in the longest bull market in history, but all good things eventually come to an end.

One of the more likely ways that the nine-plus-year bull market might end is a scenario where the Federal Reserve raises interest rates too quickly. Rapidly rising rates would make it harder for consumers to pay off variable rate debt. That pain would ripple through the economy, eventually hurting companies' sales and reversing the direction of the economy and the stock market.
However the stock market suffers a serious reversal, you can rest assured that it will happen eventually. Corrections and even bear markets are entirely normal. Research shows that corrections of at least 10% occur on average 2.27 times per year, and bear markets, where prices fall at least 20%, occur an average of .73 times per year.

Due to the age of the current bull market—more than nine years—many investors have started to think about pulling their money out of stocks at some point before the next big dip. I can't say emphatically enough that doing so is almost always a mistake.

Investors get into trouble when they believe they can "time the market"—getting in before prices rise, and getting out before prices fall. But anticipating changes in the market is extremely difficult because each up and down cycle is different. Too often, investors get out of the market too soon, only to watch it continue to rise, or they get out too late, having locked in losses. And they almost always get back into the market well after it's been rising, which means they've lost out on gains.

Market timing helps to explain why individual investors tend to badly underperform the market. For the 10 years through 2017, the average stock fund investor earned 4.8%, while the S&P 500 returned 8.50%, according to research firm Dalbar. That's a huge gap in performance.

The key to successful long-term investing isn't trying to predict when you should buy or sell. It's exercising patience and discipline. Successful investing starts with developing a diversified portfolio that is right for your personal goals, time horizon and comfort level with investment risk. Then, it's primarily a matter of letting the markets do their work. Yes, there will be short-term ups and downs. But over the long term, stocks have always gone higher, benefiting investors who are wise enough to ride them out.

Please contact us if you'd like to learn more about the keys to successful investing.