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Is the Recent Market Decline a Sell Signal?

The market has been particularly volatile since mid August and has fallen over 10% since May 21st. A 10% decline in the stock market is often referred to as a “correction.” What is an investor to do after such a decline? This month we have a guest blog post from Weston Wellington, a Vice President at Dimensional Fund Advisors. He tackles this issue in the article, Should Investors Sell After a Correction?

The article echoes our belief that volatility is to be expected from the market and that after significant declines, markets have historically posted very strong returns. If an investor tries to time when to get out of the market they also have to time when to get back in. If they do not get the timing just right they historically would have missed out of significant positive performance.


Index Performance                                 Sept.      3Q     YTD   Trl 1Yr       

US Stock (Russell 3000)                              -2.91%   -7.25% -5.45% -0.49%
Foreign Stock (FTSE AW ex US)                -4.53% -11.96% -7.74% -11.11%
Total US Bond Mkt. (BarCap Aggregate)   0.68%    1.23%   1.13%   2.94%
Short US Gov. Bonds (BarCap Gov 1-5 Yr) 0.51%   0.68%  1.59%   2.05%
Municipal Bonds (BarCap 1-10yr Muni)    0.63%    1.32%  1.64%    2.22%
Cash (ML 3Month T-Bill)                              0.00%   0.01% 0.02%   0.02%



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