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| Subject: 1979, Business Week proclaimed "The Death of equities". What followed was the start of Wall Street's longest running bull market. | |
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Date Posted: Saturday, July 26, 11:14:04pm In reply to: Sunday, March 26, 2028 's message, "http://www.deathclock.com/" on Thursday, July 03, 12:11:31am COLONIAL 1ST STATE LESSONS FROM HISTORY Markets have not been kind to investors in recent times. The Australian sharemarket has fallen by over -5.8%* in the year to June 2002, so it is not surprising many investors are starting to rethink their investment strategy. Whenever markets fall, it is difficult to see how things will ever turn around. From past experience markets do eventually recover, but it is hard to accept this when you are losing money. It is times like these when it pays to consider the facts, and think very carefully before making changes to your investment strategy. Looking at what has happened in the past can help you do this. For example: 1974, in the 12 months to August 1974, global stock markets fell by 33.8% in $A terms. Over the 12 months that followed, the market rose by 41%, and rose by an average of 19.9% for the 5 years that followed August 1974. 1987, global stock markets collapsed again, and continued to head lower for the following year. The market bottomed in August 1988, it had fallen by 21.7% in the preceding 12 months. In the 12 months that followed, the markets rose by 33.3%. 1990, the Gulf Crisis erupted, and in the 12 months to September 1990, global stock markets fell by 26.3%. In the 12 months that followed, markets rose by 28.7% and rose by an average of 23.7% over the 3 years following September 1990. 1994, markets were again under pressure as a result of the bond market collapse, and other non-related factors such as the Kobe earthquake and the collapse of Barings Bank in the UK. In the year to December 1994, world stock markets fell by 8%, but rose by 25.9% in the year that followed and by an average of 23.9% over the next 5 years. In the past, times when investors felt the most anxious, or even afraid, turned out to be exactly the times not to sell. Investors that did sell, and turned their paper losses into actual realised losses, were left behind as markets recovered sharply. Chopping and changing investment strategies when markets fall is rarely a profitable exercise. The risk of being left behind when markets rally can be too extreme and can have a huge negative impact on returns. In the past patience has been rewarded, and investors that stuck to their investment strategy and remained patient, even in the most difficult times, were rewarded for that patience. Investors that lost patience, and focused on the short term, were heavily penalised as markets rallied. Finally, reading the newspapers may not help you make sensible decisions. For example: 1979, Business Week proclaimed "The Death of equities". What followed was the start of Wall Street's longest running bull market. 1988, the Chicago Tribune announced the "Stock crash will last 4-5 years", at almost the precise time the stock market bottomed and rallied close to 23% in the following 12 months. 1990, the Washington Post ran the headline " Is the great bull market finally over: Gulf Crisis revives fears". Again, the stock market ignored the headlines and rose by close to 30% in the 12 months that followed and by an average of close to 24% over the following 3 years. Clearly, the "great bull market" wasn't over just yet! 1994 was no different. The headlines forecast doom and gloom, immediately followed by a sharp rally and headlines again proclaimed dire consequences from the Asian crisis in 1997, again to be followed by strong gains in share prices. Now, in 2002, the newspapers are suggesting that this time, things will be different and the bear market will go on and on. Nobody can forecast the future, but history has shown us time and time again that when things look really bleak, a strong recovery is just around the corner. [ Next Thread | Previous Thread | Next Message | Previous Message ] |