The wild stock market swings of 2008 have not been for the faint of heart. The last several months have been brutal and it seems lately the market knows only one direction – down.
Our investment portfolios have tanked and most people are powerless and don’t know what to do. It’s the “deer in the headlights” mentality.
Should I pull out of the market, should I diversify, should I stay the course ….. ? All valid questions, but no easy answers.
But in volatile times like what we’ve recently seen, it’s important to remember one of the fundamental concepts of investing – “staying the course”.
Take an example where you invested $10,000 in a portfolio back in 1972. As the market dropped and say your portfolio hit $6,300, you decided to shift out of equities and reinvested in a 6-month CD at the average 9.90% for the period. After 10 years, your investment would have grown to about $16,130.
But if you would have remained with your original investment (such as the S&P 500) over the same period – your portfolio would have grown to around $24,969. That’s a big difference versus going the CD route.
The best advice is to discuss your options with a professional financial advisor and figure out what is best for you and your situation.
My last words come from Warren Buffett, “Our favorite holding period is forever.”
{ 1 comment… read it below or add one }
Willaim Baxter 11.18.08 at 8:08 pm
It’s hard to find anybody out there that feels “staying the course” is the right investment strategy. I’m so depressed and my broker keeps saying “the worst is behind us”, yet the market keeps finding a way to drop even further.