Here’s how bad news pushes this market higher
If there is one great
investing secret that has stood the test of time, it is that recessions,
depressions, and market calamities can offer investors their greatest rewards.
Professor Jeremy Siegel of the Wharton School
shows how beneficial rough times can be in his book The Future For Investors.
Motely Fool’s Rex Moore also wrote extensively about this in his 10-28-05
commentary, concluding that "depressions are good for you." Take for example,
the mother of all calamities, the 1929 stock market crash and the Great
Depression that followed. The Dow did not reach it’s 1929 September high of 381
again until 1954!
According to Siegel’s research, anyone who stayed
in the market after suffering the big losses and reinvested their dividends in
more stock would have quadrupled their money in that same period. This assumes
you only owned dividend paying stocks and reinvested all dividends in additional
shares while they were low.
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