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Now browsing: Hometown News > Business Columns > Vivian Cubilla

Vivian Cubilla
This Week | Archive


Unsettling times still offer opportunities for investors
Rating: 2.89 / 5 (197 votes)  
Posted: 2006 Jul 14 - 02:53

If you remember 1973, you know it was a difficult period for the United States. A series of events, including the Watergate scandal, the OPEC oil embargo, the Vietnam War and the resignation of Vice President Spiro Agnew, had shaken the public's morale.

By November, President Richard Nixon's approval rating stood at 37 percent and presidential approval ratings tend to track the mood of the nation. Given all this, you might think that 1973 was not a good year in which to invest in the stock market.

But you'd be wrong. From Nov. 30, 1973, to Nov. 30, 1983, the S&P 500 recorded an average annual return of 10.9 percent. So, if you had invested $10,000 in the market at the beginning of that period, it would have grown to $28,139 by the end. And over the next 20 years, from Nov. 30, 1983, to Nov. 30, 2003, the S&P 500 returned, on average, 12.8 percent a year; consequently, $10,000 invested in 1983 would have grown to $111,219 in 20 years. (Keep in mind, however, that the S & P 500 is an unmanaged index, and you cannot invest directly into it. Also, past performance is not an indication of future results.)

In short, if you had started investing in the troubled year of 1973, and you had kept investing, you would have probably done pretty well over the next three decades.

Now, let's look at what's happening in the country in 2006. We are facing global unrest, high gas prices and concerns about economic security.

Although there are some similarities between 1973 and 2006, a controversial war, high gas prices, political concerns, there are also some key differences.

Perhaps most important, our economy today is much stronger than it was back then. And as an investor, you might be particularly interested in the following:

Interest rates are near a 40-year low. When interest rates are low, it is less expensive for businesses to borrow money to expand their operations. And as businesses grow, so does their attractiveness to investors.

Corporate profits are growing rapidly. Corporate profits have expanded at double-digit rates for 10 consecutive quarters; profitability is one of the key fundamentals that drive a company's stock price. So, despite the worried national mood, the investment climate of 2006 may actually be quite promising.

Don't stop investing

It's true that 2006 may be an unusually tense year for the country. But as we've seen, 1973 was also a difficult year - in fact, by some measures, considerably more unsettling than 2006 - and yet, many investors who had faith in the financial markets in 1973 were amply rewarded.

Of course, you might not achieve similar returns going forward over the next few decades. No one can predict the future course of the markets. But the experience of 1973 shows the historical importance of continuous investing. A systematic investment plan does not assure a profit and does not protect against loss in declining markets. Such a plan involves continuous investment in securities regardless of fluctuating price levels of such securities, the investor should consider the financial ability to continue the purchases through periods of low price levels.

So, don't let today's headlines keep you on the investment "sidelines." If you buy quality investments, diversify your portfolio and invest for the long term, you may be able to design a strategy designed to work toward your financial goals in good times and bad.

Vivian Cubilla is a bilingual financial advisor with Edward Jones. Her office is located on 12575 S. U.S. Highway One, Suite 203 in Juno Beach. Contact her at (561) 799-3340.





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