My Blog, Your Money

Keeping up with the trend of the past month or so, it was another terrible week for the market (stock not grocery of course).

Here’s a few highlights or rather lowlights of this past week:

·        With a loss of 1,871 points (-18.13%), it was by far the worst week of the year for the Dow Jones which ended the week at 8,541.19.  The second worst week of the year was the previous week at -814 points, less than half this week’s loss.

·        The Dow Jones dropped below

·        10,000 for the first time since April 20, 2005

·        9,000 for the first time since August 6, 2003

·        8,000 for the first time since April 1, 2003

·        This was the first week this entire year where the Dow Jones declined each day of the week.

·        An interesting pattern I noticed is that the number of negative days per week has been increasing by one day each week since 3 weeks ago.

·        Thursday was the anniversary of the highest ever close of the Dow (14,164.53).  However, one year later, the  Dow lost 682.5 points.  Since then, the Dow has lost 5,713 points or 40%.

·        The other indices did not fare so well this week either with the Nasdaq falling 249.12 points or 13.12% and the S&P500 falling down 198 points or 18.07%.

So what does all this mean?  Well, I know these stormy markets have many people worried and fearful, but every cloud has a silver lining.  To me, it’s like the stock market is having a giant sale.  Stocks may not have reached their lowest prices, but unless some apocalyptic event occurs, the stock markets will flourish again.  And you don’t want to miss the market on its way up.

Get this: a 2005 study showed that from 1963 to 2004, a selection of stocks had an annual return of 10.84%, but if the 90 days with the highest gains were excluded, that return would drop to just 3.2%.  That is a humongous difference over time.  In fact, if you were to invest $10,000 in 1963, assuming 10.84% annual return, you would have $680k.  However, at 3.2%, you would have about $36k.  Because of the power of compound interest, the first total is more than 18 times (!!!) that of the second.  I guess my point is: if you have some cash laying around and have patience, do some research and pick up some bargains.  If you don’t have any cash, get some.  And if you aren’t patient, learn.  You don’t want to miss the upswing.