Buy The Dip, Sure, But Be Prepared To Wait 16 Years To Make Your Money Back…

Buy The Dip, Sure, But Be Prepared To Wait 16 Years To Make Your Money Back…
Stéphane Renevier, CFA

almost 2 years ago1 min

The Invesco QQQ – which tracks the performance of the Nasdaq-100 – has got a lot of people talking recently: it’s down about 23% down from its recent peak, which has investors betting it’s ready to bounce back. After all, the index has recovered quickly in the last few years whenever it’s entered a technical bear market – that is, dropped 20% from its previous highs.

But that’s not always been the case. In fact, the index lost almost 85% of its value between 2000 and 2002, and it took a whole 16 years to recover. That’s not just a big fall: it’s an awfully long time to wait for your investment account to be in the black again. And while the index has been on a run of sharp recoveries, there’s nothing to say that this kind of epic drawdown won’t happen again.

So while you can hope for the best, you should prepare for the worst. If you don’t think you can handle an 80% loss – or don’t want to wait more than a decade to recoup your losses – consider allocating a smaller portion of your portfolio to risky assets like stocks. and holding a higher weight in cash. You may miss out on some gains if markets rebound, sure, but successful investing is first and foremost about being able to survive difficult times.



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