1. Since 1980 the average intra-year decline in the SP500 has been roughly 14%. 26 out those 34 years despite the average intra-year drop the market closed positive, 76% of the time. That does not mean that the declines were not painful; it's just a reminder that the market goes UP and DOWN, not up OR down. And, draw-downs are unavoidable, there is no sense in trying to avoid what cannot be avoided.
2. Its never been wise to be a bear for too long. In the last 89 years, stocks closed down 20% or more six times (7%). 35 out of the last 89 years stocks delivered 20%+ returns, (39%). Try to minimize your losses but never forget that the real game is played on the long side.
3. The SP500 annualized gain is 10%; that doesn’t mean that you will make 10% every year, you are going to have good years, bad years, great years, and awful years.
4. You will have reasons why should get out of the market; they will always be more enticing, believable, and persuasive than the reason you should stay in, especially if you are still licking your wounds from 2007.
Feel free to plot the reasons above to the SP500 chart below.
5. Realize that there is a time to be aggressive and a time to just move a couple of pawns around just get a feel for the environment.
6. Stay thirsty, don’t disengage.