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BUSINESS

Buy and
Hold,
Index
Funds
and the
Next
Bear
Market

Aspect Wealth Management

According to the Wall Street Journal, in the 1970s most experts pain seeing their portfolio values down month after month when
believed that modern economies were fundamentally stable, and reviewing their account statements.
deep recessions and financial crises were unusual events caused by
outside events such as bad government policies, wars and oil price Many academicians and theorists have suggested that the best way
shocks. Current popular economic theory suggests that recessions to get through these difficult markets is to buy low-cost index funds,
and bear markets occur regularly, and the groundwork for them is hold onto them for a long time and you will eventually be rewarded.
actually laid during periods of relative stability. Regardless of which Historically, this approach has worked every time but with one big
camp you fall into, one vitally important question that every investor caveat: your success depends greatly on when you begin taking in-
must address is “How will you weather the next bear market?” come from your investment portfolio. For 30-year old investors, the
recent bear market in the “Great Recession” of 2008 and 2009 ac-
From the beginning of 1980 through 2014 (35 years) the stock tually created a great opportunity to invest more capital at low
market rose an astounding 82 percent of the time (only six down prices, and to patiently watch as they were rewarded. However, for
years). However, the severity of the down years derailed some of the those in or near retirement, declines of 30 percent, 40 percent or
best constructed retirement plans for millions of Americans. In the even 50 percent were disastrous. Delaying retirement by five years
past 15 years the S&P 500 Index has fallen by about 50 percent or going back to work were not uncommon remedies to get retire-
twice. Most investors reading this article can remember with great ment plans back on track.

28 San Antonio Medicine • May 2016