Keep Your Arms and Legs in the Car at All Times

Many of us enjoy thrills: that giant coaster at the amusement park or the latest heart-stopping blockbuster at the box office. However, when it comes to volatility in our portfolios, most of us prefer the carousel or a documentary on the history of deck staining.

The past week was not a very tame period. In fact, it was the worst week for the NASDAQ market since March. After hitting all-time highs the previous week, the NASDAQ market has been like a rollercoaster with lots of twists and turns ever since. We saw the markets climb higher and higher in August followed by a steep drop last week. From the market peak, the NASDAQ market had a sharp 11% pullback over a three-day period.  This has left many investors waiting for their stomachs to fall back into place and ready to exit the “ride.”

According to history, this may actually be good news. Bespoke Investment research shows that in previous instances when the NASDAQ market dropped 10% or more in a three-day span, the NASDAQ bounced back strongly. There were 38 times where this occurred, and the average gains afterward were as follows:

• One week later: 3.06% average gain
• One month later: 9% average gain
• Three months later: 8.75% average gain

Our portfolios at Ambassador have not been spared from the selloff. During times like this, many are inclined to get off the ride and send cash to the sidelines. These scary times in the market often cause investors to worry or second guess their financial strategy.

We should not fear.  The Apostle Paul provided great wisdom for times like these:

Don’t worry about anything; instead, pray about everything. Tell God what you need, and thank him for all he has done. Philippians 4:6

What we “want” and what we “need,” of course, are often vastly different.  Our faith drives how we approach these markets. Instead of approaching these downturns with fear of losing what we want, we should view these dips as great buying opportunities. As we get to the second half of September, we should see the markets pick back up in the historically stronger part of the month.

Like the warning, “For your safety while on attractions, please keep your hands, arms, and legs inside the ride at all times,” we need to adhere to the adage of “staying invested” for our own financial safety. We are in the middle of a market correction, and this ride should be over soon! If you have any money on the sidelines, now is a great time to take advantage of these dips to get ready for the next climb higher.

Sources: Yahoo Finance, Reuters.com, and JP Morgan Market Insights

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