In the three month period between Oct 19th, 2007 and Jan 18th, 2008, the S&P 500 index fell 14.
1% and the Russell 2000 Value Index fell 19.
5%.
To understand what is likely to happen next, I studied the top 10 worst three-month-sell-offs since 1950.
These sell-offs ranged between -13% to -30%.
I found that in 8 out of the 10 occasions, the S&P 500 index rebounded by more than 20% in one year.
The average rebound is 22.
2%.
Small Cap Value stocks did even better than Large Cap stocks (represented by the S&P 500).
The Fama/French Small Cap Value benchmark portfolio rallied more than 30% in one year in 8 out of the 10 occasions.
In the other two occasions, it increased 6.
6% and 24.
1% respectively.
The average rally for the Fama/French Small Cap Value benchmark portfolio is 37.
1%.
(See Table below.
) A market sell-off is not a risk As Demonstrated by history, most of the worst market sell-offs were followed by a substantial rally within a year.
Many investors panicked and fled to cash at the nadirs of the sell-offs.
By the time they mustered enough courage to get back in, they had missed the rallies.
If you want to achieve long-term investment success, treat a market sell-off as an opportunity, instead of a risk.

Table: One-year returns after the worst 3-month sell-offs 3-month3-monthSubsequentSubsequent endingdeclineS&P500 1y retS/V 1y ret Nov 1987 -30% 23% 32.
7% Sep 1974 -25% 38% 42.
4% Jun 1962 -21% 31% 37.
9% Jun 1970 -18% 42% 55.
4% Sep 2002 -17% 24% 41.
4% Sep 2001 -15% -20% 6.
6% May 1962 -14% 23% 30.
6% Oct 1990 -14% 34% 49.
6% Oct 1957 -13% 30% 50.
5% Nov 2000 -13% -12% 24.
1% Average-18%22.
2%37.
1% * S/V = Fama/French Small Cap Value benchmark portfolio Data sources: Fidelity MARE group, Prof.
Kenneth French data library.