Some Food For Thought in A Brutal Market

Written by The Dividend Guy on July 27, 2007

I was looking through some financial websites trying to see what the reaction to this weeks down market and of course as media often does, they are talking about the end of the world. I stopped reading after awhile because it was getting me down - the kind of unproductive ‘down’ you get when you read article after article of sensationalism that seems to be selling newspapers and article these days. Just as I was about ready to stop, I cam across one article that put things into perspective quick well I thought.

The article was posted on Money.com and was written by Jeanne Sahadi, a CNNMoney.com senior writer. In her article she quoted an individual from Ibbotson Associates which as I understand from their website is a type of consultancy that advices big fund companies on topics such as asset allocation and the investment process. The quote is as follows:

For every 20-year and 30-year rolling period since 1926, there have been more up months for stocks than down ones…And even over 10-year rolling periods, there were only two in which the months of negative stock returns exceeded those of positive ones.

The gist is that there are going to be more up times than down, but there will be down times. We just had one of them and it may continue for a bit - but if history is to be a guide then things will turn up again and the articles will once again turn to talking about how good everything is - whatever it takes to sell papers. As an investor, I believe it is important to recognize that these events will happen and that staying the course is a more prudent action, given what history has told us.


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3 Comments so far

  1. Jason Dean July 28, 2007 1:53 pm

    I think that you’re right about the sensationalism. It’s enough to get anyone down, but it is mostly to sell papers and to get people to tune in to TV shows. There are always going to be cycles. It seems like every time the market is down, people think it’ll never rebound.

  2. Jim July 30, 2007 6:38 am

    Unless I had a serious need to cash in my investments relatively soon, i.e. retirement, I’d look at a bear market as nothing but a buying opportunity. I can’t tell you how bad I wish I had more money available to sink into undervalued stocks right now.

    You think Warren Buffett would let some financial tabloid impact his investment decisions?

  3. The Div Guy July 30, 2007 2:41 pm

    I think history will show this was a time to buy.
    Thanks for the comments on my blog. I have enjoyed reading your site. I think my dividend style differs from yours as I prefer to look for stocks with a higher yield and that are currently out of favor.

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