So why not just invest in big companies and forget about it, be a long-term investor?

Making money on big-company stocks is not automatic unless you buy into a mutual fund. Even if you select your stocks from companies with a solid brand name you might still get burned.

From 1972 to 1974, adjusted for splits

• Avon dropped from $140 down to $18.62
• Coca-cola down from $148.75 to $44.63
• IBM down from $341.31 to $150.50
• Intel down from $56.05 to $10.25
• Johnson and Johnson down from $133 to $57.60
• Eastman Kodak down from $151.75 to $57.63
• Mc Donald’s from $77.31 down to $21.25
• Polaroid, from $149.50 down to $14.13, now gone
• Procter and Gamble fell from $112.75 to $67
• Walt Disney from $211.63 to $30.75
• Xerox down to $49, from a high of $171.88

From June 1990 - June 2000

• JC Penney down 39%
• Toys R Us down 49%
• K-Mart down 50% and now about $1.00
• Xerox back up to $124 in 1999, is now trading at $5.50

And sorry investors who’ve held on to the stocks are saying “sooner or later, these companies have to come back!”

Remember Woolworth’s, TWA, Polaroid, and Montgomery Ward? How quickly we forget that even giants like Texaco went through a bankruptcy reorganization.

Of the 500 largest companies in the San Francisco area which includes Silicon Valley:

Even the general market, full of big companies, can hurt you.

• If you invested in the market in 1969, you didn’t break even for 4 years, then lost again, and finally made money in 1981.
• In just one day, on October 19 1987, the Dow dropped 22.8%
• From 1973 to 1974, The S&P 500 dropped 42%
• There were 9 recessions in the past 30 years

Sounds awful! Why would anyone make such losing investments? Well hang on there, wait just a second. I wouldn't send you down a dead-end street.

The average bear market may last 9 months, but the average bull market lasts 3 years and 9 months.

From 1982 through 1999, the S&P 500 averaged a gain of 19% a year - that's a total return of 2,200% !

It even gets better:
In 1961, if you began investing just $5.00 a day in the S&P 500 and stopped saving after only 10 years, you would have (in 2001) a cool $1,212,000 - that’s 1.2 million dollars!

I hope a light is glowing brightly in your head, if not you'd better check your pulse. You see, if you are properly invested, it just doesn't matter what the market does year-to-year.

Yes, there were 9 recessions this past 30 years, but there were also 9 recoveries!

No matter how severe the bad years, the stock market always recovers and soars to new heights. Always has, and as long as America stays strong, it always will.
 

Other Stock Market Basics Topics:

1. Stock Market Investing – the Right Way
2. More Stock Marketing Investing
3. How to Pick Winning Stocks
4. The Golden Rule of Investing
5. Avoid Psychological Traps to Have Successful Investing
6. Changes in Stock Values Can Be Big Numbers
7. How to Invest Smart
8. Stock Advice - Important Selling Rules
9. Poor Stock Buying Decisions
10. Market Indicators
11. Stock Market Cycles
12. When a bear stock market may not be a bear market
13. Stock Index Futures
14. Four Things that Affect Stock Valuation
15. What is a P/E ratio?
16. Value Investing
17. Cheap Stocks
18. What is a Financial Statement?
19. Analyzing Financial Statements
20. Stock Market Tip - Red Flags to Look For When Investing?
21. The Annual Report – How to Read
22. Stock Market Analysts – Stock Market Advice and Tips