When markets fall, it’s easy to forget that downtrends are part of the investing cycle. They don’t feel as good as when the market is experiencing uptrends, but that doesn’t mean that they can’t be a healthy part of the nature of investing, and even sometimes necessary. So when prices slip, it's a good time to understand some common terms that you may be hearing to describe financial markets.
The first is “pullback,” the mildest form of a drop in the markets. You might hear a market commentator refer to a dip of 5% to 10% after a peak as a pullback.
The next term is “correction,” which is used when markets drop 10% to 20% after a peak.
Then there is a “bear market,” where the drop is 20% or more since the last peak.
When prices are trending higher, you may want to eagerly jump into investing more or feel happy emotions about your situation. When prices are trending lower, it’s easy to second-guess yourself. But as we see time and time again, sticking to a diversified plan can be much more valuable than off-the-cuff decisions.
At Allos, we align your investment strategy with your goals, time horizon, and risk tolerance and design portfolios anticipating that there will be good times and bad.
If you find yourself thinking “this time, it’s different,” please reach out as soon as possible. If you don’t already have a strategy, we would be happy to share how we might be able to help. If you have a strategy you are not comfortable with, it might be time to reevaluate your risk tolerance level.
Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product made reference to directly or indirectly in this content, will be profitable, equal any corresponding indicated historical performance level(s), or be suitable for you or your portfolio. Due to various factors, including changing market conditions, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter (article) serves as the receipt of, or as a substitute for, personalized investment advice from Allos Investment Advisors®, LLC.
The content of this letter does not constitute a tax or legal opinion. Always consult with a competent professional service provider for advice on tax or legal matters specific to your situation. To the extent that a reader has any questions regarding the applicability of any specific issue discussed in this content, he/she is encouraged to consult with the professional advisor of his/her choosing.
Published for the blog on January 26, 2023 by Allos Investment Advisors®, LLC.
