A Roller Coaster Market Can Be a Good Time to Buy Good Companies

Greg Addison | 1-3-2019

Wow! What a ride! Will we remember Sept. 20, 2018 as the market peak of this 10-year bull market?

Since Sept. 20, the S&P 500’s price declined about 14.4% (measured using the ETF SPY) and closed down about 6.2% for the year. Traders kept hoping for a big turnaround late in the year, but it failed to happen.

While the market may be starting to decline, it’s important to remember three things:

  1. It’s not clear that a recession is imminent.
  2. You cannot time recessions. Even more importantly, you can’t time the market with any consistency at all.
  3. The powerful long-term wealth creation of stocks comes at the ‘cost’ of holding through volatility and downturns.

In our view, the single greatest mistake investors make is to sell when the market declines. It does not make sense to sell on price declines. If you’re holding stocks from fundamentally sound companies, a lower price means an asset is a better bargain (and therefore a worse sell).

Our investing philosophy is defined by minimizing expenses, acquiring quality investments and sticking to a long-term plan. This means buying and holding (so long as dividends are stable, or growing, and long-term expected total returns are reasonable).

It’s important to understand that expected total returns rise as prices decline. Any dividends (or other additional money) you can invest when the market is declining is typically invested at more attractive return rates.

If you are inclined to be a dividend investor, you should also understand that in general, quality dividend stocks will pay steady or rising dividends when the market is declining. Your income stream from stocks isn’t nearly as volatile as stock prices themselves. If your income isn’t significantly affected, holding through downturns becomes much easier.

Finally, it’s not ‘just you,’ almost everyone sees paper losses when markets decline. However, it’s those investors who understand declining markets offer great opportunities to buy good companies at attractive prices that end up avoiding converting paper losses into “realized losses.”


Questions? You can reach Greg Addison at 1 (800) 821-7715 x142, or via e-mail at gaddison@lewer.com 


Lewer Financial Advisors, LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for general information purposes only, and is not intended to provide, and should not be relied on for tax advice, legal advice or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction. Lewer Financial Advisors is a multi-state registered investment advisor domiciled in Missouri.

All securities transactions involve substantial risk of loss. Under no circumstances does the information in this report represent a recommendation to buy or sell specific stocks or other investment instruments. As with any investment, past performance is not necessarily indicative of future performance.

Lewer Financial Advisors is a member of the Lewer group of companies.

Greg Addison

Author: Greg Addison

Greg Addison is the Senior Vice President of Lewer Financial Services, LLC. Lewer Financial Advisors is a corporate Registered Investment Advisor, specializing in both personal wealth management and institutional retirement plan consulting for the individual investors, business owners, dealers, retailers, and franchisees who know The Lewer Companies well.