Many of the events depicted on this chart have been costly. The market, however, has not only survived, but thrived. For more than a century, the U.S. market has endured wars, recessions, assassinations, scandals and natural disasters. And each time it has come back.
Through it all, the market has demonstrated remarkable strength and resiliency in the face of challenges. Investors should follow suit.
#2: Diversification Still Matters, So Keep Your Balance.
In the 2008-2009 bear market, diversification didn’t matter. The Great Recession took a toll on nearly every asset class and portfolio. But in the 2000-2002 downturn, diversification worked. If you hadn’t piled into tech, you were spared a lot of pain when the dot-com bubble burst.
The debate over investment diversification is likely to go on and on, but today a strategic allocation in stocks and bonds around the world remains a hallmark of a portfolio that can help investors fulfill their objectives in the long run.
Investors are likely to be faced with situations in 2017 that might tempt them to deviate from their long-term strategy. For example, the United States’ economy looks likely to continue setting the pace for global growth, while Europe’s economy continues to struggle. That might make some investors question the value of investing broadly.