Over the last several years, the overall markets including the S&P 500 index have been on one heck of a run. In fact, according to Yahoo finance, the S&P 500’s average annualized gains over the last 8 years is above 10%. Plus, it has done this with very little volatility. This combination has fooled many investors into thinking that markets are secure and they can now just rely on a passive index funds to grow their money for their lifetime. Are you getting this false sense of security?
Eight years is a long time, but it should not be long enough to make you forget that the markets can lose money, and lose it quickly. Remember, most market indexes including the S&P 500 lost nearly half its value between August of 2000 and September of 2002, and over half its value between October of 2007 and February of 2009. Some people are still trying to get those losses back even though the most indexes have fully recovered.
Obviously, 10% plus annualized passive index returns clearly isn’t sustainable for the long term. The current bull run is extremely aged as it is currently the second longest cyclical bull run in history. And as everyone knows, markets don’t simply go up every year. A major market correction is overdue and a possible major decline is possible.