Should you be scared of a bear market with the S&P/ASX 200 Index (ASX: XJO)?
The ASX 200 dropped by 36.3% between 21 February 2020 to 23 March 2020. That was a painful decline.
Every bear market is caused by a different reason. Various declines may be similarly painful as this one, but this is quite unique because it's a healthcare problem as well.
Investors only decide to dramatically sell shares when there's a genuine reason to fear. It doesn't happen randomly.
The share market regularly goes through a period of falls roughly every decade. When you keep that in mind you may be able to take a tiny bit of comfort from the fact that this occasionally happens.
Shares have returned an average of 10% per annum over the long-term. That average includes the bad times like the GFC. Like the 1987 crash. And so on.
When you look back at history, the best time to buy shares is after they've been sold down hard.
Should we be scared of this bear market?
It's okay to be scared. It's a self-preservation feeling that helps us avoid danger and stay alive. On the healthcare/infection side of things we should be wary and cautious about what's going on.
But on the share market side of things it's important not to let those feelings make you sell everything. Selling your shares during the GFC would have been wrong the wrong call. This period of uncertainty will pass just like others of the past.
The world has been through a lot since 1900. Wars, recessions, various politicians. The globe even had a similar pandemic with the Spanish Flu a century ago. Those bad times passed and the share market kept climbing over time.
It's not enjoyable seeing your investments decline in value (on paper) by more than 20%, 30% or even worse. But these falls actually get me excited to invest into shares. We probably won't see prices this low with interest rates this low for a long time again. I have been investing and will keep investing.
