Last month, the stock market temporarily touched correction territory before bouncing back. Even so, it was an incredibly tough month for stocks across a range of sectors, and some investors fear a bone fide correction could be yet ahead. In this segment of Backstage Pass, recorded on Jan. 19, Fool.com contributors Rachel Warren, Danny Vena, Jose Najarro, and Trevor Jennewine discuss these recent market events and what investors should and shouldn't focus on during choppy market periods.
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Rachel Warren: Do you think we could be nearing correction territory? If so, are you changing anything about how you are going to be investing as we enter the new year?
Danny Vena: I think that we are very likely headed to at least a 10-percenter. The Nasdaq is already there. I don't think the S&P and the Dow have very much further to fall. That said, if you go back and look historically, I mean, this happens fairly often.
For me, it doesn't change anything about how I invest. I'm continually adding to my portfolio. That way, I'm buying when stocks are up, I'm buying when stocks are down. I continually add to the companies that I have a strongest convictions in, and I don't really do anything differently.
Rachel Warren: Yeah. Don't try to time the market is a good lesson. What about you guys, Jose, Trevor, any thoughts?
Jose Najarro: Go ahead, Trevor.
Trevor Jennewine: No, Jose, go ahead.
Jose Najarro: [laughs] I was going to say, yeah, very similar to Danny, no major changes to my portfolio. I still continue to add on a weekly basis. I think probably the biggest change I have made recently is trying to increase my weekly changes, maybe trying to work on a few more stuff to increase my income a bit to do a little bit more purchasing.
Rachel Warren: Awesome. Trevor?
Trevor Jennewine: Yeah, I fall in the same boat as these guys. I can go a little bit further. I think I would welcome a market correction. I guess I always feel more comfortable investing in situations like that and maybe we see things calm down a little bit if we had a significant pullback.
Rachel Warren: Yeah, a little contrarian. I like it. I think it's important to talk about because we've been looking at how the market has been doing over the last couple of months. It's been a really choppy time for the stock market, then a rough start to the year, and it's easy to let emotions get in the way when you're investing. One of the things I like to do that can be really helpful to put those emotions at bay a little bit is when you look at how the stock market's done over a period of time, it's been a fantastic decade for stocks.
The S&P 500 alone is up about 330% in total returns over the last decade. But even if you pull that window in to a much closer period, over the last year alone, the markets delivered a total return of 23%. I think it's very possible we may be headed for another correction. I think that when we look over the lifespan of the market, we know that these dips, they happen fairly regularly.
The market is cyclical. Every couple of years or so on average, over the last 50-plus years, we've had a correction and some of them have been worse than others. But I think that the key lesson to takeaway here is trying to time the market, trying to guess when those dips might be, that is one of the fastest ways to do real harm to your portfolio.
On the other hand, if you have the cash to invest, cash that you're not going to need in the next few years, cash that you were willing to put in your portfolio in high-quality companies and leave it there, then now can be a great time to do that, a correction can be a great time to do that.
On the other hand, you don't have to invest in more stocks right now. If you are happy with where your portfolio is and you're not sure if you want to dip more into certain stocks, it's totally OK to leave your portfolio alone for a little while and then get back into the market once those emotions have subsided a bit.
I think that this will be something we're going to be waiting and seeing. I personally plan on keeping investing even if we do have another correction. I tend to go with Trevor's point. I like buying stocks when they're down, businesses that I think have a really good long-term growth trajectory, and we might have an opportunity to do that sooner rather than later.