We are back in a bull market as of last month! Despite many “experts” predicting 2023 would be a bad year for stocks, the S&P 500 is up 20% so far this year.
What is a bull market? It’s a term that Wall Street likes to use to describe when the stock market goes up by 20% or more. On the other hand, a bear market is when the stock market has gone down by 20% or more.
In a perfect world, you would only invest during bull markets and go into hibernation during bear markets. Sadly, without the help of a magic crystal ball, you won’t be able to know when a bear market will happen. So, the best way to ensure you can take full advantage of bull markets is to always be invested no matter what is happening in the world. Bear markets can feel terrible when you live through them, but they are a small price to pay to get to enjoy the massive gains that a bull market can give you.
What will happen during this bull market? No clue. It could last another few months or over a decade. But remember, it doesn’t really matter when you are a long term investor. You will experience many up and down markets. And that’s okay. Because we know that no matter how crazy the stock market might seem on any given month or year, it has a 100+ year track record of averaging 10% a year.
The chart shows monthly total returns of how the S&P 500 performed in the ten years following the start of each bull market since 1950. The average bull market lasted about five years, so some of the ten year periods in the graph include bear markets as well.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Vivi & Shane
