In the long term, stocks have provided us with good average return results . But this average return masks a great deal of volatility , because returns have fluctuated within a very wide band .
This extreme volatility is the main risks of investing in stocks , but it is a risk that investors tend to deviate from memories after a long period of generally rising stock prices .
Investors who are new to investing in stocks, the volatility of stocks underestimate because volatility is muted in recent years .
Greatly reduces time , but certainly do not eliminate . Volatility of returns of stocks On the other hand, there is no guarantee that you earn above average returns , even if you hold stocks for two decades or more .
Investors who are relatively new to investing in stocks can benefit from some perspective on declining markets . During bear markets , indexes declined on average by 25-35 % . Although the average bear market lasted slightly longer than 12 months , it took almost 20 months for the indices to return to the levels achieved before the market falls back.
While no one can reliably predict the timing of bear markets (or bull markets , for that matter ), a prudent investor extent share prices may fall and willing to "ride out" these periods when they occur should understand .
The great danger of falling markets is that investors will sell at or near the bottom of the recession . Those who got out of stocks missed an extraordinary revival of stock market performance .
Since risk is unavoidable when investing in stocks, perhaps the biggest risk is that you will never invest in stocks , because you never know when is the " right time " to invest .
Uncertainty is a permanent part of the investing landscape , and try to be the ideal time to invest to differentiate is almost always a futile exercise .
Do not be swayed by market fluctuations or the opinions and predictions of market analysts and forecasters !
Your investment strategy and expectations should all be based on your personal goals , time horizon , risk tolerance and financial situation .
It should not be determined by the direction of financial markets or the opinions of " the experts! "
Copyright © 2005 I.E.C. Haramis
Ioannis - Evangelos C. Haramis was born in Greece in 1951 and studied in Greece , the U.S. and Belgium . He has been active in the equity markets since 1972 . Since 2002 he is New Business Development Managing Director at an Investment Bank and editor of
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