| Fiction | Facts |
|---|---|
| The expectation of a stock market correction justifies stayong on the sidelines. | If you're anticipating a stock market correction, you're probably right, as declines of at least 5% occur virtually every year; 10% six years out of ten; and around 15% four years out of ten. Nevertheless, history shows that investors willing to stay invested through these fluctuations are well advised, as even the average return in years marked by a correction of 10% or more is positive. Thus, investors whose investment horizon allows for patience are probably better off accepting rather than fearing the inevitable periods of correction, as these are, in some ways, the price to pay for achieving their return objectives in the long run. |
| Selling in times of heightened uncertainty can protect investments from heavy losses. | Selling in times of heightened uncertainty is generally the best way to ensure heavy losses, as it often rhymes with selling low and missing the rebound. More importantly, one should keep in mind that the only certainty is that there will always be uncertainty, as it is the price to pay for capital appreciation in the long run. And – need we add – it isn’t in the media’s best interest to report the latest news with nuance and historical perspective; better to let fear and pessimism easily set in. However, the chart on the right should act as a reminder that letting emotions take over is a good recipe for short-term gain, but long-term pain. |
| The political party of the government in power has a significant impact on equity market returns. | Over the very long term, history shows that stock markets have been successful in continuing their upward trend regardless of which political party is in power. Over the past 50 years, an investor who had decided to stay on the sidelines when the President was not of his political stripe would find himself (badly) trailing an investor who decided to always stay invested. In the end, history shows that investors benefit from not letting politics and investments mix, as difficult as that may be at times! |
Facts & Fiction
Updated on September 30, 2025
Here are 3 of the 13 common investment beliefs deconstructed by our CIO Office.
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