While many aspects of investing in the equity markets may seem unpredictable, one constant remains: volatility. Just how common are market fluctuations? Even in years when the S&P/TSX Composite Index has performed well, we should expect substantial volatility. Over the past 40 years, despite average annual performance of more than 6 percent, the average intra-year decline was -15 percent (see graph below for performance since 2005), with corrections of 10 percent or more occurring more than half of the time and drawdowns of 15 percent or more occurring one-third of the time!
Successful investing involves being prepared for both the market ups and inevitable downs. While it’s never easy to see portfolio values decline during temporary down periods, patience and perspective are important. Don’t let short-term fluctuations disrupt long-term financial plans.
