Stocks for the long run - buy the dips

Most investors claim to retain their faith in stocks as the best long-term investments. Experience showed that market sell-offs were indeed ideal times for investors to commit more to the market. The mantra of the common investor in the 1990s was "Buy the dips."

Despite the steadfast faith in the market, the bear market of 2000 - 2001 has raised doubts in many minds about the desirability of holding the overwhelming proportion of a portfolio in stocks.

• Has the continued popularity of the stock market planted seeds of its own destruction?
• Have investors sent equity prices so high that they cannot in the future possibly match their superior historical returns?

The answer to these questions must come from an understanding of how stock prices influence their future returns.