Beursvloer #251 - Hebzucht houdt de mens in zijn greep

quote:

A handy field guide to stock market corrections below (data via Dow Jones, Morningstar, Bloomberg):

* Since the end of World War II (1945), there have been 27 corrections of 10% or more, versus only 12 full-blown bear markets (with losses of 20% +).

* This equates to one correction roughly every 20 months

* The most recent correction took place in 2011, between the end of April into the end of September. The Dow dropped roughly 16%.

* As to what we should do during corrections, I’d recommend maintaining a list of high-quality stocks you’ve been kicking yourself for missing out on and clearing the decks of any longs you don’t truly love. For those with time horizons longer than five years (most), the best thing to do is grit one’s teeth and do very little. If a correction of between 10 and 20% is unbearable to you mentally or financially, that means you’ve either got more money than you should invested in stocks or you’re kind of a fairy. Make the adjustment you can live with and remember this feeling the next time you find yourself chasing the market.

* As to the question of whether a correction could become a bear market (or worse even, a crash), the answer is that this is always possible. But most corrections do not become crashes, and every single one of them turned out to have been great buying opportunities in the fullness of time.

* Lastly, remember your ABCs: Always Be Cool.