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[From The Archives] Peter Lynch On Investing In Volatile Markets

"The stock market is a volatile animal. There have been some traumatic declines in the stock market in the last year. Historically we have a decline of 10% or more about once every two years. That's the nature of the market, even in good markets we have declines, and trying to predict its direction over the near term is an exercise in futility. Behind all the smoke and noise on the market's surface, it's important to remember that companies – small, medium and large – make up the market's backbone. And corporate earnings drive stock prices. If you look at the 500 companies in the S&P 500, despite 10 recessions since WW II, earnings have grown 7% annually. That's a pretty good track record." -- Peter Lynch

The market's volatile movements during the past week have, unsurprisingly, shocked some investors. However, for long-term value investors, the market turbulence shouldn't be an issue.

Peter Lynch is undoubtedly one of the greatest investors of all time, and he knows a thing or two about navigating stormy markets. During 2004, Peter Lynch gave an interview within which he detailed his survival tips for investors in volatile markets.

Peter Lynch: Volatile markets

Peter Lynch starts off the interview by looking to reassure readers. Lynch states that he's been investing professionally for over 32 years and has seen "many difficult times", including the market crash of 1987 (the Dow fell 23%) and six recessions.

"Throughout history, there have been other difficult times. Depressions, the rise and fall of communism, the rise of free-market economies and failing banking systems. The September 11th tragedy was horrific for the country, but it is not the scariest time I've gone through in the stock market."

The point is, throughout history...


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