From the January 2003 issue of Better Investing … a reminder to focus on what really matters following yet another particularly challenging period in the stock market.

Enough is enough. Are we ready to throw in the towel? Is it now time to sell all our stocks and abandon our investment club?

No. It’s not. Nobody said this was going to be easy all the time.

In fact,we know that just the opposite is true. Sometimes the largest rewards are realized by those who find a way to ignore the dreary consensus and invest regularly in companies that will survive the stock market storm.

Up and Down and Working

As the market trudges along during 2002,we seem headed for a third consecutive year of lower stock prices.

As this issue goes to press in early November, the Dow Jones industrial average (DJIA) is down another 15 percent year-to-date. It may be hard to believe, but we’ve been tested before. In many ways the tribulations of 1973-1982 were far worse.

Sneak a peek at the accompanying chart. The graphic shows that the DJIA seemingly made no gains for a period of nearly 10 years. Many of the painful prognosticators on television and in the print media are fond of pointing out that stock prices went virtually no where between early 1973 and mid 1982.

At first glance it’s hard to argue with the facts. The DJIA increased from 118.40 to 144.30 some 10 years later — an annualized appreciation rate of 2 percent.

But that’s an urban myth.

Someone who invested $20 per month into the DJIA over those 10 years would have contributed a total of $2,400. The value of this $2,400 stake actually reaches $3,400 at the end of 1982. The reality is that during this terrible test of investor resolve, a committed and disciplined effort to invest $20 a month (in the DJIA) netted an annualized rate of return of 11.5 percent.

Ugly Charts, Ugly Ducklings?

The story doesn’t fluctuate.

Stock prices do. Looking at the ugly chart shown above, I thought it might be interesting to take a look back at what our NAIC editors said during times like 1975, 1978 and 1982. These had to be times when it seemed like the stock market would never continue its upward advance. It had to be particularly depressing as the DJIA approached and retreated from 1000 three separate times over that 10-year period.

As the 1980s began, our editorial reflected on the challenge of the 1970s.

“With the 1970 and 1974 credit crunches, the oil embargo, the high rate of inflation, escalating fuel prices and international instability, it’s hard to picture a worse time for investing. The poor investor who hasn’t had guidance in this period has been lost at sea.”

“NAIC’s suggestions are basically simple. We believe that investing in stocks is a way to take advantage of the growth that businesses continually strive for.”

“By carefully selecting good companies and paying no more than reasonable prices for them, investors can enjoy their progress.”

At the time, a scholar had written a book and placed NAIC stock analysis tools in a featured place in his text.

In his opinion, our tools were the “Standard of Excellence” of all the stock analysis material he had seen.

Long-time NAIC investors who own good quality stocks over their lifetimes have excellent results.

No one knows how long a market decline will last. When the fall continues over a long period,it becomes very difficult to continue investing.

But profits come quickly once the turnaround begins, and they begin to multiply. Note the right-hand side of the chart.

Put down that towel, throw another $20 into the club kitty and hug an ugly duckling.