Published May 2002

‘Bad times’ to invest
can yield good results

By Eric Cumley
Columnist

Is there ever a “bad time” to invest? Interestingly, over time many people have thought so — for one reason or another — but they’ve usually been proven wrong.

Just glance back over the past 20 years. We’ve had plenty of economic and financial events that probably caused people to delay investing. But in many cases that hesitancy proved expensive. Consider these bits of history:

Recession: It’s New Year’s Day 1982, and the United States is in the midst of a recession. So, you think twice about venturing into the market. But if you’d put $10,000 in the stocks making up the S&P 500, you’d have accumulated more than $190,000 by the end of 2000.

S&L bailout: Fast forward to New Year’s Day 1989. The U.S. government is on the verge of bailing out the savings-and-loan industry. Grim news for investors, right? However, if you were able to overcome your concerns and put $10,000 in the S&P 500, your money would have grown to some $63,000 by the end of 2000, when the bailout had become a distant memory.

Stock “meltdown”: Now it’s New Year’s Day 1995. The investment community is still reeling from 1994, when more than 400 stocks dropped 40 percent in market value, vaporizing billions of dollars of wealth. Do you really want to jump into the stock market? If you had, your $10,000 investment in 1995’s S&P 500 would have grown to more than $31,000 just five years later.

Of course, these results, encouraging as they are, can’t be used to predict future market performance after a crisis (real or perceived). Furthermore, these three events haven’t been the only “dark clouds’’ on the investment horizon over the past two decades. In fact, you probably wouldn’t have to look too hard to find a reason not to invest in any given year. There’s always something going on: bad economic news, political or military instability, energy crises, you name it. If a person continues to delay investing until conditions are “perfect,” they’re going to be in for a pretty long wait.

You can’t control world economic and political events, but you can manage your response to them. Instead of letting today’s headlines dictate your investment decisions, make up your mind to focus on the future. Instead of aggravating yourself over how this or that event will affect a particular stock, focus on quality. Start now. Build a diversified portfolio of high-quality equities, and hold them for the long term. Do this, and you’ll have a good chance of achieving the type of performance you need to help meet your financial goals.

If there are no “bad times” to invest, then are there particularly good times? Yes, and the best time is today! As an investor, you must put time on your side. The longer you hold your equities, the greater your potential for growth. Plus, over long periods of time, market price fluctuations tend to even out.

The next time you’re pondering all the reasons you should put off investing, close your eyes and picture yourself in 10 or 20 years, looking back on recent events and despairing over the opportunities you missed. That should be enough incentive to spur you into action.

Eric Cumley is an Investment Representative with Edward Jones Investments at 1201-C SE Everett Mall Way in Everett. He can be reached at 425-353-2322. Edward Jones is an NYSE-member investment firm with more than 7,000 locations nationwide.

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