Investing seems easy when markets rally and are generally calm. But markets don’t just move up or in a single direction. Markets adapt, gyrate and create new cycles with each being slightly different than the one before. It’s during the more tumultuous periods of a market cycle when investing is hard. How investors confront the challenge of downturns determines the outcome and success of portfolio performance over the long run.
Markets on Sale
As markets recovered from the COVID-19 crisis, everyone dove into technology and large-cap growth stocks, so much so that the top 10 holdings of the S&P 500 were mega-cap, technology-related names becoming 30% of the index and drove broad market returns. As these stocks continued to surge, investors didn’t stop the buying frenzy despite lofty valuations and high prices. These stocks and higher-risk areas of the market fell the most during the recent market correction and could now be viewed as being on sale. So why are investors unwilling to take advantage of these sale prices? Emotions!
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