3. We can set funds aside for a rainy day. On average, since World War II a bear stock market (defined as when stock market averages drop at least 20% or more from their highs and stay down for at least 60 days) occurs about every 3-4 years, though without any particular regularity. We are currently in a bull stock market (defined as a 20% or greater advance from a major stock index low). In this case, it has persisted for quite awhile, by some calculations since March of 2009, over 7 years. It may yet continue for a few more, but odds are another bear market will occur before the end of President-elect Trump's term. It is suggested that we can keep our powder dry by maintaining a substantial portion of our liquid funds in certificates of deposit, money market accounts, or other cash-equivalent reserves, ready to be fired into low-priced stock shares once the next bear market is underway. We might dollar-cost-average investments into safe but (by then) beaten down stocks or stock mutual funds, maybe ones like those in the table.
Places to Put Our Dollars in a Bear Market
|Expediters International of Washington||EXPD||$51.50||1.55%|
|Infosys Ltd. (ADR)||INFY||$13.89||2.70%|
|Novo Nordisk A/S (ADR)||NVO||$32.42||2.80%|
|Vanguard 500 Index Fund Investor Shares||VFINX||$202.11||1.92%|
If one had invested in Vanguard 500 Index Fund Investor Shares at the end of February, 2009, for example, and kept those shares of VFINX till November 17, 2016 (the last date for which records are available at time of writing), he or she would have seen a rise in the holdings of over 200%, a 7-plus year average annual increase of more than 15%.