Newspaper article Sarasota Herald Tribune

Fortitude Will Increase Your Wealth's Magnitude

Newspaper article Sarasota Herald Tribune

Fortitude Will Increase Your Wealth's Magnitude

Article excerpt


To quote from an old rock and roll tune, Wall Street is often "a slipping and a sliding." So what should you do when the market hiccups? The answer to handling the vagaries of the markets is to not panic, i.e., no fire sale of your securities. Just sit tight and ride out whatever waves of volatility befall you. Yes, at times it can be gut-wrenching.

Academic studies have shown repeatedly that patient long-term investing continues to be one of the most successful strategies. A corollary to that statement would be that after a period of turmoil ends and the dust settles, consider doing some selective bargain hunting among the debris.

If you cannot find fault with the stocks you are holding, you should never be ashamed to stay the course. Unfortunately, I cannot take sole credit for those timely words of wisdom.

"I've always believed that investors should ignore the ups and downs of the market." Peter Lynch, the former manager of the Fidelity Magellan fund, wrote in his 1989 book, "One Up on Wall Street."

Periodic declines in the stock market are inevitable. It is impossible to predict exactly when corrections will occur, how long they will last or their severity. Fortitude, not panic, will see you through. It would be a rare occasion indeed where liquidation would be the strategy of choice. Of course, it would be judicious to be prepared for just such an eventuality.

You need to know your investment objectives. Opportunities abound in bull markets, bear markets and everything in between. To take advantage of potential opportunities, if you own a fundamentally sound stock that has fallen victim to the market's herd instinct, consider adding to your position.

In any period of confusion and carnage, the intrinsic value of securities often increases as the shares go on sale. Dividends continue to be an excellent proxy for the intrinsic value of a stock. Look for undervalued dividend achievers -- any company that has increased its cash dividends annually for at least 10 years.

What about trying to predict a major market upswing or downswing? Trying to do that is guaranteed to be a lesson in futility. …

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