The wild swings in the equity markets and the general downward trend over the past several months makes investing in equities a scary propositon these days. Behavioral  scientists tell us that the pain of a loss is twice as great as the joy of a gain. So, our natural reaction is to pull out of the markets and wait for things to settle down.

Of course there is a lot of research that shows that those who pull out of the market tend to do so at the bottom of the cycle and do not get back in until close to the top of the cycle. In other words the result of giving in to our emotions is to sell low and buy high.

Overcoming hardwired cognative reactions is very difficult at best. The only way to overcome this is to be aware of our natural tendencies and to arm ourselves with historical information.

To that end I want to share with you the chart above that is produced by Dimensional Fund Advisors.  The chart is backward looking and shows the duration and magnatude of the bear markets and the bull markets starting in 1926. There are a few lessons that can be learned from this chart:

• The average duration of the bull markets is approximately 88% greater than the average duration of the bear makrets.
• The gains during the bull market are substantially greater than the losses during the bear markets.
• There are significant market declines during bull markets and significant gains during bear markets indicating that the long-term trends are not obvious to market observers until well after the fact.
• The chart suggests the importance of maintaining a disciplined long-term investment approach. Reacting emotionally to short-term movements creates a risk of making ill-timed decisions.

At Allison Spielman Advisors we want to put you at ease about your money. So, if you have concerns or questions or if you just want to talk about your portfolio, give us a call.