Since 1987, stock market investors have seen more changes in the market than many investors do in a lifetime. In less than a decade, investors have experienced dramatic rises, corrections, as well as a "leveling out" in the market.

While the market has weathered wars, politics (including the Clinton scandals), natural disasters, and a number of fluctuations over the past few years, it has presented even more investment lessons and opportunities for those investors willing to look long-term. This acquired knowledge can be turned into investing advantages: positives that can be mined from knowledge about investing in bull markets, during recessions and even during wars.

Historically, all corrections in the market have been temporary and shouldn’t be shocking. Future shifts in the market always can be expected, but their timing and direction simply can’t be predicted with great accuracy. That is why it’s important to invest with a number of objectives in mind.

Time over Timing

The benefit of patience has been proven since the decline of 1987. Generally, many of those who looked to the long term in 1987 and "stayed put" have recouped their losses and seen gains, based on general market performance. Time, not timing, remains the most important investment key. Investing for the long term -- "riding out" market fluctuations -- has historically proven to work. (Although past performance does not guarantee future results.)

Even with the market corrections that we have experienced, the historical "up" performance of the market shows that over the long term, past returns in equities have outperformed other long-term investment choices. Know why you are investing, and the time horizon for each investment. If the horizon is long-term (over 5 years), evidence shows that equities are a good choice. However, investors need to set priorities, educate themselves and invest accordingly.

Portfolio Protection Through Diversification

Diversification is a strategy that softens market swings and needs to be built into one’s investment approach. Investors, heeding the “doom and gloom” predictions of market “experts,” sometimes move their money from one investment to another, only to see negative predictions not materialize. Such stories show that it is important to trust your own judgment first, and to diversify your portfolio into a variety of investments that meet your financial objectives. A well-diversified portfolio helps protect investors from drastic market swings. This approach will enable you to take advantage of growth in different market sectors at various times, while providing risk protection when the overall market declines.

Diversity can come automatically with mutual funds, which are designed specifically to spread resources over a board range of securities. One mutual fund provides an investor with diversity, yet a portfolio review often will point out excessive overlap of like funds -- an over balance in large cap domestic funds, for example, each investing in similar or the same companies.

Low Values Can Create Opportunity

Another important lesson to be learned from the past five years, and from any time in the market’s history for that matter, is one that’s exciting but often misinterpreted. Market corrections create opportunity. That is not to suggest the daily chasing of what appears to be every opportunity for a “quick score,” but investing when prices have experienced a downturn can be a good time to invest.

You want to “buy low” and “sell high,” but history shows that these rarely can be done successfully over a short period of time. Opportunities seized in a down market often can’t be realized without the patience to benefit from the long-term gains that the market historically has delivered.

Dollar-Cost-Averaging

The strategy of "dollar-cost-averaging," -- investing equal amounts of money at regular intervals -- is particularly advantageous during market swings or declines. Over time, an investor will buy more shares when the price is low and fewer shares when the price is high. Thus, the average price per share purchased is lower than if a fixed number of shares were purchased.

Conclusion

Predicting the market with accuracy is a difficult challenge, even for the experts. But reflecting on the market’s history -- both long term and in recent years -- clearly suggests trends from which informed choices can be made. Patience and diversification are watchwords for most successful investors.