Nobody knows what will happen to the stock market over the next several years, but if history holds true, now's the time to acquire new holdings and continue dollar-cost averaging.  The table below from T. Rowe Price Shows that recoveries from the low point of bear markets are quite dramatic a year later.  If only we could predict when the bottom hits.  Instead of trying to time the market - always a risky proposition - you can ensure that you enjoy at least some of this gain by continuing to invest regularly.  Investment clubs that meet monthy are a great vehicle for this.  The annual gains from the market botton tend to continue strong for 10 years.

"Some of the best investment opportunities have become available in bear markets," T. Rowe Price says in its latest quarterly publication.  "For example, in the 10 recessions since World War II, markets have tended to recover well in advance of the economy and, within six months to a year, deliver healthy returns from recession low points.  Much the same has tended to be true after big one-day market losses during recent crises, such as the Sept. 11 attacks in 2001 and Black Monday in 1987."

On reason investors have such great opportunities during these times is that market fears lead to mispriced assets.  In other words, stock prices become disconnected from their fundamentals.  High-quality stocks can easily become casualties during these times, so opportunites abound.

Recoveries From Bear Markets in Stocks

Average annual returns of the S & P index after declines of 20 percent or more

(Dec 31, 1956 to Dec 31,2007)

Market Bottom	1 year later	3 years later	5 years later	10 years later
September 2002	22.2%	14.7%	13.4%	N/A
November 1987	18.8%	11.8%	13.4%	15.3%
July 1982	51.8%	21.3%	24.4%	14.8%
September 1974	32.0%	15.0%	11.5%	10.1%
June 1970	37.1%	13.0%	4.6%	4.3%
June 1962	26.7%	15.4%	10.6%	6.9%
Average Annual Return	31.4%	15.2%	13.0%	10.3%

Analysis: T. Row Price Associates. Data Soures: monthly S & P 500 index. Declines of 20 percent or more form previous market peak, based on month -end index level.

Article provided by: BetterInvesting     January/ 2009 issue

Please feel free to contact either Mr. John Forbes, CPA at jforbes@deimlingforbe.com or Mr. Robert J. Deimling, CPA at rdeimling@deimlingforbes.com with any questions or concerns.