Death, Taxes and Market Volatility

Posted on February 8, 2008 at 1:11 pm
Filed Under Financial Markets, Financial Planning, Investment Planning

We have all heard that the only guarantees in life are death and taxes. That’s nothing new. I would like to suggest however that you can add one more “guarantee” to the list.

What is it you ask? Market volatility in all its glory and frustrations. There is no question that one who has looked at history will agree with the unfortunate reality that to make money, we need to ride the waves of the market. It may not be ideal, but it’s no different then realizing that the snow we have experienced further enhances our enjoyment of the upcoming summer and sun. Silly analogy? Maybe, but it is absolutely true.

Your Take-Away: Positive posts like this are fun to write, but many are thinking I’m just a naive writer so let me back up my thoughts. On Black Monday in 1987, the Dow dropped a whopping 21% in one day. That’s more then quadruple our greatest one day drop this year. Needless to say, the markets had returned to the original value of the day before the vicious drop within two years. In fact, five years later you would have made 41% on your money, and 10 years later you would have made 253% on your money by simply staying the course.

This is not always the case and not every drop has a positive ending. By looking at an Andex chart however, you will notice that most do and market volatility is just a part of being an investor.

Until next time, have a Fantastic Friday!

Chris

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