History on Your Side
 

If your investment horizon is 10 years or more, history would argue that the current correction shouldn’t spook you from the market. The average annual return in the energy sector for the past 10 years is 13.3%, and that includes the loss of 35.6% in 2008. But the key to these sorts of returns is not to panic.

 

While we would all love to buy at the bottom and sell at the top, that’s not a realistic expectation. What is easily achievable, I’ve found, is to remain consistent with my investment style. Switching strategies abruptly or often is a recipe for disaster. There is a temptation during a long bull market to become more aggressive and take bigger risks, but an occasional correction is a good reminder that investors need to be comfortable with their investment style and risk tolerance. 

 

Last week we counseled readers not to bargain hunt too early and changed all the portfolio Buy recommendations to Holds to make the point. So far that caution has proven wise. Now we’re dipping our toes back into the waters with two financially strong and yet recently discounted new picks whose cash flow won’t wilt with the price of oil.

Market corrections are never fun, but the current sell-off is an opportunity for investors to reflect on their goals and investing style. Remember that in the long run the trend is your friend, but as you get closer to retirement age you will have less time to recover from a 2008-style decline. Invest in quality companies. Do not take risks above and beyond your comfort level, but remember that history is on the side of those who are patient.