“When the siren song starts to waft toward you, lash yourself to the mast of broad-market investing.” — Ben Stein1

On Monday August 24, the stock market took investors on a wild ride; the S&P 500 tumbled by over 5% as the market opened, trimmed its losses to roughly 1% by the early afternoon, but closed the day with a 4.1% decline. Commentators attributed the downturn to a culmination of factors including a slow-growing Chinese economy and uncertainty over Fed interest rate policy.

Rather than join the crowd of Tuesday morning quarterbacks by weighing in on world events and what investors can next expect, we will provide data to put this event in perspective.

The chart below shows the total hypothetical return provided by the entire U.S. stock market following recent stock market crashes.

In five of these six episodes, the market rebounded and after five years had provided positive returns, with an average cumulative total return of over 45%. In only one instance were five year returns negative.

Investors should avoid the temptation to move in and out of markets based on emotions or the whims of prognosticators. In the face of short term volatility, the prudent course of action is to make no changes, or to rebalance your portfolio to your target allocations.

Also In This Issue

Healthy, Wealthy And Wise
To Spend Or To Save: Compound Consequences
The China Syndrome
A Reader Inquires
The High-Yield Dow Investment Strategy
Recent Market Statistics
The Dow Jones Industrials Ranked By Yield
Recommended Investment Vehicles