Share prices fall as well as rise-what you really need to know about stock market falls

When you look at the stock market over a period of time you will notice the following:

  1. You can expect share prices to fall by 10% every two years. You can describe this as a correction.
  2. You can expect share prices to fall by 25% every six years. This is known as a bear market.

That is the bad news. If you do not have the financial or mental equanimity to accept these falls you may want to reconsider investing in shares.

The good news, however, is you can expect the stock market to double every eight to nine years. This is based on the historical average of an 8% increase in corporate profits.

The better news is if you are prepared to accept these corrections and bear markets you will see opportunities presenting themselves each time there is a fall. Combine that with a reasonable expectation that the stock market will double in value in 8 or 9 years and you have a recipe for significant growth of your capital.

All you need to do is buy into good companies and hold. Hold the shares and hold your head.

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