Articles From the April 1995 Unification News
Some Myths and Truths About Market Volatility
by Gary Barker
Instinct is difficult to overcome. The temptation to move to the sidelines during times of market volatility can be great. However, stock market investors with a long-term perspective should keep the following in mind:
* The latest economic news, or political developments at home and abroad, can cause stocks to "react emotionally" on a daily basis.
* Over the long term, share prices will largely be determined by the sales and earnings of the underlying company.
* Investments in solid, high quality stocks are generally worth holding onto through short-term market gyrations.
There's Never a Bad Time to Make a Good Investment
History has shown that the stock market has a remarkable record of rebounding from crisis situations. In fact, neither inflation, recession, war, nor even the Great Depression of the 1930s proved to be more than a temporary setback to the upward momentum in stock prices.
Sometimes the rebounds come within days, as in the case of the attempted Soviet coup, the 1989 Chinese student revolt, the Cuban missile crisis and President Kennedy's assassination. At other times, it may take several months, as occurred after the Korean War and Iraq's invasion of Kuwait. Ultimately, however, stocks have come back.
Market Timers Beware
Staying out of the market, even in tough times, can carry a heavy penalty. A study conducted by DataStream and Sanford Bernstein & Co. Revealed that the 2,528 stock trading days of the 1980s produced an annualized return of 17.6%. However, missing just the 40 best days out of that period clipped the return to only 3.9%.
Listen to the Experts
When you begin to worry about market volatility, remember to take the long-term view.
* "Drops are unsettling, but it is important to understand that company fundamentals do not change overnight. Well-financed growing companies will do well over time, and rather than try to pick the perfect time to be in or out of the market, we have found that investors who have stayed the course through good and bad times have ultimately had the best returns." --Bill Jurika, Jurika & Voyles
* "Many investors won't buy shares until the outlook is good--until they come out of the tunnel into the daylight. But if they have that attitude, they never will enjoy a bargain, for share prices usually turn up before most can see the light at the end of the tunnel." -- Sir John Templeton
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