You’ve heard these words before – the direction of the stock market – particularly over short time periods – is very difficult to predict. Look no further than the recovery in stocks that began, unannounced, in early March 2009.

That period of time represents yet another case where, just when you are convinced the market will continue moving in one direction, sentiment shifts without notice and stocks are suddenly heading in a completely different direction. While this has happened throughout the history of the markets, too many investors have a difficult time remembering the market’s history of unpredictability, and often change course at precisely the wrong time. Many make the mistake of selling near the market’s low point, then miss out on a recovery.

Those who sold out in early 2009 paid a steep price. From its low on March 9, 2009 to the end of April 2010, the Dow Jones Industrial Average (DJIA) gained 67 percent, a dramatic rally for such a short period of time – but not unprecedented. Compare it to other major bear markets and follow-up recoveries in U.S. history:

In each of the cases, the starting point of the rally was unpredictable. Yet the results were extremely beneficial for those who kept their money working in the market.

Have a plan and stick with it
Just as dramatic market recoveries often begin without notice, the same can be true of market downturns. In today’s environment, where the media can provide you with nearly a minute-by-minute assessment of where the markets stand, it is easy to think about short-term trends and get caught up in the idea of trading in-and-out of the market. This is a very challenging investment approach that few have managed to master. It is also a high stress style of investing that is subject to a wide range of unforeseen variables that can impact markets on a day-to-day basis.

For most of us, it may be more sensible to maintain a “tried-and-true” approach to investing. This involves:

• Putting money to work regularly – most of us do this with each paycheck by directing part of our income into our workplace retirement plans. Regular contributions to IRAs and other investments also make sense.
• Owning a diversified mix of investments – you should choose an asset allocation strategy that is appropriate for your risk tolerance level, investment objectives and the time you have available to let your investments grow.
• Holding for the long run – to help avoid the potential for losses from short-term market swings, you may be better positioned for success by maintaining a long-term stance with your portfolio.

Michelle L. Heide, CFP® Financial Advisor Patton, Heide & Associates, a financial advisory practice of Ameriprise Financial Services, Inc. 1318 Route 31 North Second Floor Annandale, NJ 08801 908.713.4903      This communication is published in the United States for residents of New Jersey only; and this advisor is licensed only in the states of NJ, NY, NC, PA, MA, MD, ME, FL, CA, and CT.      This column is for informational purposes only. The information may not be suitable for every situation and should not be relied on without the advice of your tax, legal and/or financial advisors. Neither Ameriprise Financial nor its financial advisors provide tax or legal advice. Consult with qualified tax and legal advisors about your tax and legal situation. This column was prepared by Ameriprise Financial.      Financial planning services and investments offered through Ameriprise Financial Services, Inc., Member FINRA & SIPC.      © 2009 Ameriprise Financial, Inc. All rights reserved. File # 76796