October 9, 2007.  The Dow Jones reaches 14,164, an all-time high.

October 9, 2008.  Midtown Manhattan

I’m sitting outside a restaurant with my daughter, “relaxing” in the warmth of a sunny afternoon, sharing an appetizer, drinks in hand.  I’m in the city to facilitate a presentation my colleague Bob will make about the stock market.  Ali’s a college sophomore and wants to spend a semester abroad in Israel.  Not now.  Surprise and disappointment line her face.  Sorry, but the financial world is upside down.

The stock market is in free fall with no end to the financial crisis in sight.  The Dow Jones moves like a ping pong ball every day.  The Dow ends the day at 8,579, down 679 points.  At 7.3%, the 3^rd biggest one-day loss ever.

Bob calls after the market closes.  He’s an experienced professional in our internal consulting organization.  Let me take this call.  Bob wants to know what to do.  The title of the presentation is “Volatility and the Long-Term Investor.”  I tell him to make the presentation.  He suggests updating the presentation to include stock market performance this year.  Everyone is rattled.

October 10, 2008.  Happy 80^th Birthday Mom.

The World Financial Center, New York City

I took an early retirement last year from technology consulting after 22 years, the last ten as a principal with Deloitte Consulting LLP.  I’m back at the Deloitte office wearing a new hat, one year into a second career as a financial advisor.

I’m greeted by a uniformed doorman, courteous yet exuding an air of authority.  He sees Citi Smith Barney on my briefcase, shares words of encouragement.  The Smith Barney moniker lends some credibility.

The building looks the same, the air feels different.  I walk by breakout rooms, TV screens reporting market gyrations, falling 597 points in the first five minutes, later rising as much as 322 points, down 128 points at the end of the day.  Don’t watch.

Outside the presentation room, there’s a wooden reception desk.  A receptionist asks me how long it will take the stock market to recover its losses.  How do I know?  Let me think.  It takes 3 to 5 years in the business world to get anywhere.  It usually takes until the 3^rd or 5^th level in a parking garage to find a parking spot.  I say 3 to 5 years. She says that’s what you should tell them.

I recognize some names from the sign-in sheet, a future client sits at the back of the room.  There’s a strong turnout, around 100 people in attendance.  Standing up at the front of the conference room, it’s time for me to introduce Bob.  “Thank you for coming.  I enjoyed my technology consulting career but wanted something less stressful.”

And with that, I turn it over to Bob who presents the benefits of long-term investing.  About an hour long, lots of charts, depressions, recessions, bubbles, booms and busts, the clear message is to stay the course.

Stocks are riskier than bonds.  A person with a moderate risk tolerance has about 60% in stocks.  Rebalancing your investments lets you buy low and sell high, adding to stocks during turbulent times, reducing them when the market is expensive.

The more you invest in stocks, the more money you can make over the long term, the more your investments can go down in the short term.  Annual returns are 1% better for every additional 10% you have in stocks.

Figure out how much volatility you can tolerate.  There’s no right answer.  Be honest with yourself.

Bulls like stocks, bears like bonds.

Bulls make money, bears make money.

March 9, 2009.  The Dow Jones bottoms out at 6,547, down 54% from the all-time high.

Summer 2010.  Ali finishes her senior year in Israel at the University of Haifa studying Hebrew.

March 5, 2013.  The Dow Jones reaches a new all-time high.