"Where you are in life is the most important variable that causes [volatility] concern," said Ken Moraif, a certified financial planner and senior advisor at Money Matters. "The closer you are to retirement, the more important preservation of principal becomes."
The financial crisis of 2008 illustrated how a down market can cause investors to panic. Between October 2007 and March 2009, many investors watched their portfolios lose more than 30 percent of their value. The problem, though, was that many of them pulled their money out of the market near the bottom.
"Most of our clients didn't do anything, but a few said they couldn't do it anymore and they moved to bonds or cash," said Daniel Lash, a CFP with VLP Financial Advisors. "Afterward, watching [stocks] go back up, we went to them and said, 'Here's why we should have stayed in the market.'"
From the market's low point in March 2009 through October of this year, the Standard & Poor's 500 Index has returned 159 percent. On an annualized basis, that figure is 21 percent.
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