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The bear market decline earlier this year was unique in its catalyst (global pandemic) and speed (fastest 30% drop on record), but bear markets themselves are not abnormal. And the good news for investors is that every prior bear market in history has been followed by a recovery and new bull market – a streak we do not expect to be broken this time.
Market downturns are never pleasant, and while it’s nearly impossible to avoid them, past experiences show they don’t have to derail your journey toward your financial goals. Here are three lessons from history that can serve as a valuable guide:*
*Past performance cannot guarantee what will happen in the future. We believe diversification is a critical element of a long-term investment strategy. In particular, a proper allocation to fixed-income investments can serve as a ballast for your portfolio when stocks decline.**
**Diversification cannot ensure a profit or protect against loss in a declining market. Investors should understand the risks involved in owning investments, including interest rate risk credit risk, and market risk. The value of investments fluctuates and investors can lose some or all of their principal.