The global markets rout continues Monday and many benchmark indexes are in correction territory.
If you're watching the indexes, you might be tempted to sell. But financial advisors emphasize that at times like this, it's important not to panic and to remember that market corrections are a natural part of investing.
Over the last five years, the S&P 500 is up about 15 percent annualized, points out Tim Courtney, chief investment officer at Exencial Wealth Advisors in Oklahoma City. "But you don't get 15 percent annualized returns for free. There is a cost: you have to be willing to supply capital to markets when it is very uncomfortable to do so."
Since May 2009, the S&P 500 has had pullbacks of 4 percent or greater 19 times, and we are currently in the 20th, Courtney said. That works out to more than three pullbacks per year on average. "Investors who supplied capital during these times captured that 15 percent annual return, while those who avoided equity markets and instead supplied capital to debt markets got 4 percent," he said. "Those who were in and out of equity markets probably got somewhere in-between."