Pay No Attention To Bulls or Bears
Our story so far: The Dow Jones industrial average triples (including dividends) in five years. Newsweek puts a muscular bull on its cover. The Economist of April 18 counters with a picture of a balloon, the headline, "America's Bubble Economy," and the message that the stock market is headed for a crash, imminently.</br></br>The Dow Jones industrial average falls 103 points from April 20 to 24 -- only the second weekly decline since Jan. 9. Then, on Monday, after news that the Federal Reserve Board might raise interest rates, the Dow drops 147 points.</br></br>Looks like trouble, and the newspapers are full of stories about analysts predicting a slide. But later in the week, the Dow bounces back by more than 200 points after reports that economic growth is strong and inflation nowhere in sight -- except perhaps in the stock market itself.</br></br>All the blather about the stock market being too high (or too low), about bulls and bears, about the latest GDP and CPI -- it's extraneous noise. Certainly, you should be alert to specific opportunities in individual stocks, and the economy and inflation sometimes influence the chances of, say, auto stocks or bank stocks that might be depressed.</br></br>But what investors need to remember about the market as a whole are the simple things: In the short run stocks are wildly volatile, but in the long run they are no more risky than Treasury bonds and money market funds. If you need your money in the next seven years, you have no business putting a significant portion of your wealth in the stock market. If you can keep your money working for the long term, it makes sense to be in with both feet -- as long as you can sleep at night.