Saturday, November 29, 2008

Quick thought for the day! Maybe we've already reached bottom on the stock market.

I just noticed, but last week was the best week in 34 years for the S&P US stock index, up 19%!

I've written before how much of a believe I am in all things Bogle (see last July's "Bogleheads of the World Unite!" (John Bogle being the father of passive index investing). Bogle's advice on staying the course and relying on age appropriate asset allocation offer some comfort at times like these.

In the words of investment guru Larry Swedroe "while it is almost 100% certain that the economic news will get worse (with unemployment certainly headed much higher) stock markets are FORWARD looking, leading indicators, something most investors either don't know or forget.". While we're still in choppy waters and lower earnings in early 2009 can erase this progress, history suggests we may be nearing the bottom of a 40% decline in the market's value.

If you don't stay invested and contribute during this period, you're going to miss out on historically low equity prices. When you look at a decade or more's worth of behavior of the market, there are only a few trading days where the growth of the market index value for an entire bull market is largely established. Last week was likely a clump of these days. Stay the course!


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