Declines Have Been Common and Temporary Occurrences | American Funds

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TALKING POINTS

Declines Have Been Common and Temporary Occurrences

PROBLEM: Declines can cause imprudent behavior by filling investors with dread and panic. 
SOLUTION: Realizing that declines are inevitable and have not lasted forever helps provide the perspective needed to stay the course.



History has shown that stock market declines are a natural part of investing. While declines have varied in intensity and frequency, they have been somewhat regular events.

It may also reassure you to know that the market has always recovered from declines. Although past results don’t guarantee future results, remembering that downturns have been temporary may help assuage your fears. 

 

The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.

— Warren Buffett
American business magnate and investor


The Bottom Line?  

Accept declines as a normal part of the investment cycle.

A History of Market Declines

Dow Jones Industrial Average, 1948–2017

Type of Decline

Average Frequency1

Average Length2

Last Occurrence

-5% or more

About 3 times a year

46 days

June 2016

-10% or more

About once a year

117 days

February 2016

-15% or more

About once every 3 years

275 days

October 2011

-20% or more

About once every 6 years

425 days

March 2009

1Assumes 50% recovery of lost value

2Measures market high to market low

The Dow Jones Industrial Average is an unmanaged, price-weighted average of 30 actively traded industrial and service-oriented blue chip stocks. Past results are not predictive of results in future periods. 


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Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement or a recommendation.