Market Corrections Could Be The Best Buying
Opportunities:
A History Lesson
Insights for Today’s Investor
by Anh-Thu Ma
If you invested your
money in the stock market after October 1990, you may respond differently
to a market decline than an investor who started in the 1970’s. The reason for this, the 1990s bull
market has continued to charge upward. From January 1, 1990 to December
31, 1999, the unmanaged Dow Jones Industrial Average jumped from 2,810
to 11,497.
Today’s
investors may unrealistically expect the market to keep going up because
in the last nine years, equity fund assets jumped from 4225 billion
to $2.98 trillion, as of December 31, 1998, according to the Investment
Company Institute. After
all, four out of every five dollars in equity funds have never seen
a 20% correction.
Are Your Expectations of the Stock Market Realistic?
Familiarizing
yourself with the stock market’s record may help you keep a long-term
outlook
|
Time Period
(years)
|
Start Date
12/31/99
|
Dow
Jones Industrial Average Annual Return
|
|
70
50
25
10
5
1
|
12/31/29
12/31/49
12/31/74
12/31/89
12/31/94
12/31/98
|
10.39%
13.00
16.97
18.38
27.09
27.26
|
Sources:2000
TowersData
The question is, what
is the reality of the stock market over the long term? On average, the market has experienced
a down year one out of every four years. While unavoidable, such market corrections
don’t mean the end of the world. As a matter of fact, the up markets
have more than compensated for the down years.
As we have all learned
by now that past performance does not guarantee comparable future
results, it’s imperative to understand the history of the stock market. Realizing and understanding this
may make the difference in staying the course and reaping the potential
long-term benefits of an investment in equities.
Education is the most
responsible way to begin investing .
On October 1990 when the most recent
bull run began, investors have yet to experience a 20% correction. They have only experienced new market
highs with mild dips. Some
investors have made profits but at the same time, this may also give
inexperienced investors false expectations of future market performance.
Here is some history on the stock market that
may strengthen investor awareness
•On average, one 20% correction occurs every
five years.
•The last 20% correction took place the third
quarter of 1990-more than nine years ago.
•Ten 20% correction happened over the 54-year period
from1946-1999.
Speak to Your Financial Advisor
To be more educated about
the stock market and how to take advantage of market corrections,
seek the expertise of your financial advisor at Cybervest Securities,
Inc. At Cybervest, our dedication is
to you, the investor, and your financial goals. We make it our business to help
you exceed your expectations.
Past performance cannot guarantee comparable future results.
The stock market is represented by the DOW, a price-weighed average
of 30 actively traded, primarily industrial stocks.
Results assume reinvestment of dividends. An investment cannot be made directly
in an index. A 20% decline
form annual high in the Dow constitutes a bear market. A 10% rebound from that low would
turn into another bull market.
For more complete information on any investment products,
ask your financial advisor for a free prospectus(es) and investor
guide(s). Please
read the prospectus(es) carefully before you invest or send money.
Anh-Thu Ma is the editor for the Finance & Investment Section of
Why Men Are and is is a MBA Graduate
with a Finance degree is also a GATOR Alumna. She is currently with Cybervest Securities, Inc., a full
service brokerage firm where she holds the title as Director of Operations.
©Anh-Thu Ma.
Why Men Are
