Editorial
In the meantime, sit back, enjoy, and learn from the selection of articles I’ll present to you each month.
Beth Perkins
The Perils of Being Stressed
Stress can negatively impact on our bodies a lot more than we could ever imagine.
Everyone gets stressed at some point in their lives and sometimes we can use it to push us to greater effort. But continued stress or an inability to cope with it can severely damage your health.
In Japan there is a recognised occupational disease called "karoshi" – literally meaning death from overwork. But stress can come from other sources apart from work including troublesome teenagers, lack of control over money, broken marriages, and not enough time to get everything done.
Stress damages the immune system so your defences are low and you are more likely to pick up infections. And the problem may become self-perpetuating because illness itself is stressful.
Long-term stress can lead to life-threatening conditions like cancer, heart disease and strokes, as well as depression and other mental disorders.
Positive responses
Conventional medicine has seen illness and injury as externally inflicted – something or someone else is the cause.
Alternative therapists usually get better results by proving that stress-related illnesses such as chronic headaches, acid reflux or eczema, come from within and the whole person is treated instead of the illness.
There is no one magic solution but just as the problems arise from within, they can be solved in the same way. Experts suggest a good start is eating properly, getting regular exercise and rest.
Making changes in your life is crucial. Learn to prioritise. Does it really matter if everything doesn't get done? What actions are going to have a long-term effect? Learn to forgive others or be open with your concerns. Carrying a grudge is a stressful and pointless burden – the only one who suffers is you. Take a break, learn to relax and laugh more.
Most importantly, take action on the worrisome issues in your life. For instance, if you're losing sleep over a money problem, take action to control it rather than letting it control you. Have a chat to a financial adviser and ask for solutions. Once you've got your finances in order, you'll feel the stress drop away!
History & Bear Markets
Lester Wills
Bear markets are not actually uncommon, one can even argue they an unavoidable, if unwelcome, aspect of investing.
Many will be surprised to know that in the US, there have been nine bear markets since 1950, not including the one that began in October 2007. They lasted an average of 13 months but have ranged anywhere from 101 days to more than 600 days.
That begs the question, what actually is a bear market? (Apart from one that seems to have gone down a lot). The common definition is a market decline of 20% in share prices from a previous high point. In the US this is usually measured by the movement in the S&P 500 index. So, defining what a bear market is actually not difficult, but stating when it stops is another thing because the end of a bear market cannot really be determined until a new bull market has been identified.
This of course begs the question, what is the definition of a bull market? A bull market is commonly defined as a 20% increase in prices from the beginning of the most recent bear market. Notice, that this definition does not use the lowest point reached in the bear slide, but rather refers to the beginning of the bear market.
Whilst bear markets can be painful for investors it is important they maintain perspective. By looking at the characteristics of previous bear markets and the recoveries that followed, it may enable people to not only keep current market conditions in perspective, but to also avoid emotional decision-making that could potentially be very harmful (how many people have fallen into the classic trap of buy high and sell low?).
Sizing Up This Bear
Many will recall my words that investment markets are dynamic. In this regard each bear market seems to have its own personality, stemming from a unique set of root causes. The current slide, beginning in October 2007 may differ from previous ones because of systemic uncertainty caused by a broader credit crisis. The simplistic version of the cause is that the credit markets seized up after some subprime loans that were repackaged and sold to investors began to default. This in turn led the credit markets to dry up, which then imperiled businesses that need to borrow money to finance their operations.
But of course, things are never simple. The most recent run of the bear has it’s own unique set of circumstances, such as the unprecedented steps taken by the Bush administration to aid the private sector during the credit crisis, the uncertainties created by a closely watched presidential race, and the approaching expiration dates of several favorable tax laws, and it's easy to see that bear markets can be caused, prolonged, or otherwise influenced by a range of real-world events.
Ready for the Bear's Bounce?
Sadly it is not possible to forecast exactly when this bear market will end, but, if history is any guide, share prices will move upward again. It is a question of when, not if.
What many do not realize is that considering this recent bear market began in October 2007, this upward move could be sooner rather than later. Moreover, past performance suggests that investors may eventually benefit from a post-bear bounce that could possibly be significant.
As difficult as it is to continue investing regularly in shares in the midst of a bear market, as any serious investor knows, there are compelling reasons to do just that. Share prices have historically offered the best chance for returns that will beat inflation over the long term. Furthermore, many successful investors know that when shares are out of favour, it can be a good time to buy. When prices are down, it is possible to accumulate more shares at a lower cost (who mentioned Dollar Cost Averaging?).
Edited by Beth Perkins
