Stock prices can be very volatile.
The price movements even within a year can be considerable (the average is 38 per cent).
The minimum movement within a year is still 19 per cent from the highest to the lowest price which is about 6 times greater than the average dividend yield of 3 per cent.
This means that price changes can very quickly wipe out any return provided by dividend.
This means that the value of one's investment can vary considerably from year to year. One must be able to sustain such losses if one wishes to invest in shares.
Therefore, if we buy our shares when the market is at a reasonable level (that is when the index is around the trend line or below), we can rely on the long term rising trend to obtain our gain from the market.
Unless we buy shares near the top of the peaks, we should be able to profit from buying shares after a few years. It is therefore important to go for the long run.
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