foolishmindset0116 - S p e c i a l R e p o r t J a n u a ry...

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Morgan Housel is a longtime Motley Fool columnist who focuses on big-picture issues in the economy and how they affect investors’ lives. With his Motley Fool Mindset series, Morgan brings you our best guidance on know- ing yourself as an investor, making sense of the macro matters in the world around us, and mastering the concepts that will put — and keep — you on the path to Foolish success. Here’s a special report with several essential articles that will help you stay Foolish during times when it looks like the market has lost its way. In this report: What Happens Next Keep calm by keeping perspective — today’s pain can lead to tomorrow’s gains. Get Ready for the Next Bear Market What you invest in won’t matter unless you’re willing to stay invested. Our Foolish Investing Edge Don’t worry what others think in the short term — wealth comes from a long-term focus. Battle Your Brain: How to Become a Less-Biased Investor Successful investing is less about what you know and more about how you act. How to Keep a Foolish Mindset Special RepoRt • JanuaRy 20��
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The MoTley Fool • January ���� 2 What Happens Next? Keep calm by keeping perspective — history shows that today’s pain can lead to tomorrow’s gains. The stock market has increased almost 300-fold over the past 60 years. That’s an astounding rate of growth captured in a timespan shorter than the average life expectancy. But here’s what’s amazing. During that period of growth, stocks spent the vast majority of the time well off their all-time highs. Investor Michael Batnick put together this great chart for me, showing the percentage of the time the S&P 500 has been down 5% from its all-time high (gray), down 10% from the high (blue) and down 20% from the high (red): Crunch all the data, and you’ll see that the market is at an all-time high just 7% of the time. In fact, the market is: 0% to 5% below its all-time high 36% of the time 5% to 10% below its all-time high 15% of the time this is where we are now 10% to 20% below the all-time high 22% of the time 20% or more below the high 21% of the time The important takeaway is that short-term market declines do not preclude big long-term market returns. Think about it: During a period when stocks rose 300-fold, they were below their all-time high 93% of the time. If you want something better than average in investing (or most things in life), you have to be willing to pay a price. For stocks, that price is enduring common-but-uncomfortable short-term volatility. Since not everyone is willing to deal with that uncertainty, there is opportunity for those who are. And that’s exactly why stocks do well over the long run — because we occasionally have months like this. This article was originally published in August 2015.
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