SYSTEMATIC INVESTING GETS YOU THROUGH UPS, DOWNS

This "Financial Focus" column is prepared by Edward Jones Investments, headquartered in St. Louis. Jones includes branches throughout the nation, including Cape Girardeau and Jackson.

Is the stock market becoming more volatile just when the number of first time investors has never been bigger? The media might have you think so. Every time the Dow Jones Industrial Average goes up or down a couple hundred points, the news stations scramble and the headlines blare. In fact, nine of the 10 largest one-day point declines occurred in 1997-1998. The 10th was Oct. 19, 1987.

But pay special attention to the meaning behind the phrase "point decline." At today's stock market levels, one point is much less significant than it used to be.

Looking at the market in terms of percentages is a better way to measure it volatility - and eight of the 10 biggest percentage drops occurred tin the 1930s or earlier. Some experts see this as evidence that short-term risks are actually lower today.

It's true, market indices do fluctuate more widely than the intrinsic value of the companies they represent. This is due to the fact that much buying and selling occurs based purely on emotion rather than the company fundamentals. Investor emotion can cause food companies to become temporarily out of favor, offering patient investors an opportunity to buy their stocks at bargain prices.

The best way to overcome such market swings is to practice systematic investing, also called dollar cost averaging. This is continuously investing regular amounts at regular intervals through all market climates.

To illustrate, consider the 25-year period from November 1973 through November 1998, a time that included the Dow's largest one-day point declines. Assume a $2,000 investment was made in the Standard & Poor's 500 at the beginning of each one-year period. With dividends and capital gains reinvested, this $50,000 investment would have grown to $644,914 by November of 1998 - nearly 13 times the original investment.

The past decade has been an exceptionally strong period for stocks. But over widely different market conditions, including down markets, the tried-and -true method of systematic investing has typically exceeded investors' expectations.

Too see for yourself how valuable systematic investing can be, ask your investment professional to show you how a hypothetical $2,000 annual investment in any mutual fund you are considering would have fared over the past 25 years.

The Southeast Missourian does not recommend that readers buy or sell stocks featured in this column, which is provided for informational purposes only.