Don’t be discouraged by stock market weakness in recent months. The year’s far from over; there’s still plenty of time for a rebound. What’s more, even if 2000 winds up in the loss column, the downturn is not likely to last long. In the past 50 years, the Standard & Poor’s 500 Index had 10 down years; in nine of those years, the following year had positive returns. What’s more, in seven of those nine years, the index gained over 20%. For example, the S&P 500 lost 1% in 1953 and then gained nearly 53% in 1954. Most recently, the market lost 3% in 1990 and went on to gain 30% in 1991.
What was the exception to this one-year rule? A loss in 1973 was followed by another down year in 1974. Altogether, the market fell more than 37% in the two-year period-but it gained 37% in 1975. So don’t let a few bad months scare you away from stocks. Instead, keep investing at today’s lower prices. By next year, chances are the market will be much higher than it is today.