A Correction Is Coming!

The NASDAQ is up 388% for the past ten years, so it’s due for a correction, a pullback of epic proportions. When will it happen? I’m not sure, but it is coming. Get ready.

Before you decide to sell your stocks and buy gold or Bitcoin, let’s review the last decade. A $100,000 investment in the NASDAQ is now worth $488,000, a 388% increase. The index averaged 16.9% per year for the past ten years – a remarkable number. A few components include Apple, Tesla, NVIDIA, PayPal, and Netflix, so I’m not surprised the index performed so well.

However, the NASDAQ rise was not straight-up, but a jagged increase peppered with peaks and valleys. Let’s look at a few of the dramatic declines from the past ten years.

  • 2011. The index fell 17% from April to September.
  • 2012. The index fell 8.7% from March to May.
  • 2013 was a mild year, but the index did fall more than 4% in April and August.
  • 2014. The index fell 6.7% in May, 8% in October.
  • 2015. The index fell 9.6% from July to September.
  • 2016. In February, the index fell 9%.
  • 2017 was tranquil, with one minor dip of 3.7% in July.
  • 2018. The index fell 18% from August to December.
  • 2019. The index dropped 8% in May.
  • 2020. The index dropped more than 30%.

So, my prediction of a significant correction is meaningless because the market always fluctuates – rising and falling, like the tide. Do not fear a pullback; instead, use it as an opportunity to buy quality stocks at reduced prices.

If you attempted to time the market for the past ten years while living in fear of a correction, you missed out on astronomical returns.

Stay invested, my friends.

January 11, 2021

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.

Data Sources: YCharts and Macrotrends

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