There are many lessons to be learned from this period but the main takeaway is that stocks can suck for a long, long time. Thinking that you’re mentally prepared for this type of environment is not enough. You must have a portfolio that truly matches your risk tolerance- not your risk tolerance today near all-time highs, but your actual risk tolerance. A properly constructed portfolio- one you can stick with through thick and thin, is what separates investors who can take advantage of cheap stocks versus those who get burned and never return.
Michael’s onto something important here. The S&P 500 is essentially flat since the fall of 2014. Many newly-minted passives won’t last much longer in their index positions should the grind continue. And if you throw in a disturbing drop, a la the 1973 example used at the link above, it’ll go from a mild retreat out of stocks into a full-blown panic.
People forget so easily.
Just because it’s cheap and easy to get exposure to stocks these days, that doesn’t mean it’ll be mentally cheap and easy to stick with them.