“Buy and hold,” simple asset allocation, and traditional portfolio construction may not be enough to keep investors on track toward their financial goals during volatile or severe bear markets (sustained down markets with losses of more than 20%). “Riding out” the ups and downs of the market and relying only on basic forms of diversification could leave investors vulnerable to the risks described below and with fewer tools to take advantage of opportunities for growth.
Between 1929 and 2022 there have been 17 bear markets, defined as those periods when the S&P 500 has fallen at least 20%.
The average bear market slashed almost 34.8% from stock prices. Omit the ’29 crash, when values declined 87%, and the result is still an average loss of 29.7%.
On average, a new bear market begins every 5.8 years, with an average duration of 16.6 months. Omitting the distortion of the 1929 crash, the average time lost making up bear markets (zero returns): 3.4 years.
“Riding out” severe market losses means investors will need more gains just to get back to breakeven. This is especially difficult for those who are in or near retirement or who are taking withdrawals.
Our investment philosophy centers on three core principles:
These principles form the basis of how we approach building investment portfolios that manage for risk first, seek opportunities for growth in any market, and tie performance to custom benchmarks that reflect the investors’ goals—not the performance of some random index.