To do it, you have to hold on to stocks when everyone is running for the exits. That can be hard work. At times like this, it is useful to review why that strategy has always been a winner. The first thing to remember is that stocks are very risky in the short run, but not in the long run. The same can t be said for bond investments.
Stocks don t go up and down.
They go up and down and then up again. The second thing to remember is that there is a very good reason for the long-run reduction in the risks associated with holding stocks. Successful firms grow their profits and dividends each year, and, through the miracle of compounding, that growth makes a huge difference over time. Consider a typical firm, Chrysler, the US auto maker that recently merged with Mercedes Benz. Things turned sour for Chrysler quickly.