|
|
|
|
 |
|
Stock Investments & Volatility
If the Market Makes You Nervous, Don't Watch
The best way to cope with daily swings in the market is to forget about it. If the market makes you nervous, don't watch. The percentage of equities in your portfolio should be based on your age, lifestyle, and tolerance for risk. Pick a portfolio and stick with it.
Every other day it seems the Dow Jones Industrial Average drops — or rises — 40 to 50 points. It can make you queasy.
Between Jan. 1, 1990, and Dec. 31, 1996, the Dow dropped by 50 or more points 53 times and by 40 or more points 93 times. That compares to only 25 drops of 50 points or more and 47 drops of 40 points or more throughout all of the 1980s. By comparison, there were no declines greater than 29 points in the 1970s.
The answer to whether the market is more volatile today than 10 or 20 years ago is better found by looking at percentage changes, rather than total points, as shown in the following chart.
Percentage Changes in the Dow Jones
The Impact of a 50-Point Drop
As the chart depicts, the Dow was in the 700s for most of the '70s, while during the '80s the range was roughly between 900 and 2,700. However, this most-watched index has risen rapidly in the '90s, topping 10,000 points in 1999.
That means a double-digit dip in the market this decade is less significant than a similar decline in earlier decades.
For example, a 50-point decline in 1975 would have lowered the Dow by about 6%, whereas a 50-point decline equaled less than 4% in 1985, and less than 1% in 1996.
One percent drops are no reason to bail out of stocks. A better way to look at stocks is to understand that since 1900 the Dow has been up more than 70% most of the time
This is a publication of Russell Investments Canada Limited 2001. It should not be construed as investment, legal, or tax advice. The contents are intended for general information purposes only, and you are urged to consult your own investment, legal, or tax advisor concerning your own situation and any specific investment questions you may have. For further information about these contents, please contact Russell Investments Canada Limited.
|
|
|
| |
RELATED Topics |
|
|
|
Products and services described on these websites are intended for Canadian residents only. Information on these sites should not be considered a solicitation to buy or an offer to sell a security to any person. Persons outside Canada may find more information about products and services available within their jurisdictions by going to Russell's worldwide site, http://www.russell.com.
Legal Information Privacy Policy
Required Sales Disclosure
© Russell Investments Canada Limited 2009. All Rights Reserved.
|
