Investing in Stocks in St. Louis, MO

Posted by Russell Nolting on January 8, 2009 // 0 Comments

When markets fluctuate, people get scared.  But it’s important to note that houses, like stocks, appreciate over the long term.  The key to both the housing market and the stock market is to be patient.  The article below includes a number of statistics to prove that having patience is the key to the stock market.  For similar real estate statistics, please visit my St. Louis real estate news page.   And I hope you enjoy Greg’s article.

Russell Nolting, (314) 267-2636 direct

The Case for Waiting Out the Storm

Contributed by Gregory R. Howell, Guest Blogger and Vice President-Wealth Management, Financial Advisor, 
citi smith barney
314.854.5607 Direct

Today’s financial markets are giving many investors cause to doubt the wisdom of investing in stocks. The many months of negative returns in most major markets have taken their toll on even the bravest investors. In order to put today’s very difficult events into some perspective, it may help to look back at what other people in other times may have experienced.

HYPOTHETICAL ILLUSTRATION #1: THE 1970s

Two people invest $100,000 each into identical equity portfolios on January 1, 1973,

and were able to successfully replicate the returns of the S&P 500.* Consider the abysmal market environment during 1973 and 1974 and the impact of negative returns on their portfolios.

3 Months Later…                     $95,120 (March 1973)

6 Months Later…                     $89,631 (June 1973)

9 Months Later…                     $93,951 (September 1973)

12 Months Later…                   $85,345 (December 1973)

1 Year, 9 Months Later…         $57,378 (September 1974)

What if, at this point, Investor #1 gave up and “threw in the towel?” See how the results would look if Investor #1 liquidated the portfolio and instead invested the remaining

$57,378 at a hypothetical 5% rate of return:

6 Months Later…                     $58,813 (March 1975)

12 Months Later…                   $60,247 (September 1975)

2 Years Later…                        $63,259 (September 1976)

5 Years Later…                        $73,230 (September 1979)

10 Years Later…                      $93,462 (September 1984)

What would have happened if Investor #2, on the other hand, remained committed to the original equity investment strategy and continued to mimic the returns of the S&P 500 with the remaining $57, 378?

6 Months Later…                     $77,157 (March 1975)

12 Months Later…                   $79,262 (September 1975)

2 Years Later…                        $103,404 (September 1976)

5 Years Later…                        $124,768 (September 1979)

10 Years Later…                      $244,437 (September 1984)

HYPOTHETICAL ILLUSTRATION #2: THE TECH BUBBLE

Two people invest $100,000 each into identical equity portfolios on October 1, 2000, and were able to successfully replicate the returns of the S&P 500. Consider the collapse of the tech bubble from 2000 to 2002 and the impact of negative returns on their portfolios.

3 Months Later…                     $92,180 (December 2000)

6 Months Later…                     $81,252 (March 2001)

9 Months Later…                     $86,007 (June 2001)

12 Months Later…                   $73,379 (September 2001)

2 Years Later…                        $58,347 (September 2002)

What if, at this point, Investor #1 gave up and “threw in the towel?” See how the results would look if Investor #1 liquidated the portfolio and instead invested the remaining $58,347 at a hypothetical 5% rate of return:

12 Months Later…                   $61,264 (September 2003)

2 Years Later…                        $64,327 (September 2004)

3 Years Later…                        $67,544 (September 2005)

4 Years Later…                        $70,921 (September 2006)

5 Years Later…                        $74,467 (September 2007)

What would have happened if Investor #2, on the other hand, remained committed to the original equity investment strategy and continued to mimic the returns of the S&P 500 with the remaining $58,347?

12 Months Later…                   $72,586 (September 2003)

2 Years Later…                        $82,648 (September 2004)

3 Years Later…                        $92,768 (September 2005)

4 Years Later…                        $102,769 (September 2006)

5 Years Later…                        $119,667 (September 2007)

Please click this link for Greg’s article entitled Bull Markets Last Longer.  

Gregory R. Howell

Vice President-Wealth Management
Financial Advisor
citi smith barney
101 S. Hanley Road, Suite 600 | Clayton, MO 63105
Tel: 314.854.5607 Direct | 800.325.0630 Toll Free
314.854.5606 Fax
For account access or market information please access Greg’s website at
http://fa.smithbarney.com/greghowell

Smith Barney Access is a service mark of Citigroup Global Markets Inc.
Member SIPC

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