Stock Market Information

You don’t have to tell me that it’s bad out there. I know, as I’ve watched the Dow drop precipitously over the last few days by a stunning margin (500 points Monday and..as I write this, an additional 340 points today) that there’s plenty of blood in the streets. But let’s put this into perspective. Sometimes the volatility that the market inevitably goes through can, and does, work to your advantage. How?

Bear markets help to bring the concept of risk to the forefront of our minds. It helps us remember why it is we’re long haul investors, why we want to use the stock market as a tool to invest successfully. T-bills have a good chance of outperforming the stock market this year, but we still know that historically speaking, stocks will easily outperform the mighty t-bill in a battle over the course of decades. That’s what keeps everyone from putting their money into stocks, however. The volatility keeps many investors away, and in doing so strengthens the long term returns that the markets provide.

It also helps to remind us as to why we can’t hope to time the market. Do you think you could have foreseen this drop? Did you have the foresight to know that financial institutions like Bear Stearns survived the great depression but couldn’t seem to pull through the subprime collapse and subsequent credit crisis that followed. Very few people, be they individual investors or professionals, saw this one coming a mile away, even if it feels like they should have in retrospect.

So take heart, if you’re a long haul investor, that this too, shall pass.