It may be tough to remember amid the market's massive sell-off, but it wasn't too long ago that everyone was gaga over Dow 13,000 -- even me. Sure, it was just an arbitrary milestone -- but still, like observing your odometer as it rolls over to a fresh set of zeroes, it was fun to watch anyway.
Besides, to the extent that the market's rise reflects investor optimism about corporate fundamentals and earnings -- as opposed to a top-down assessment of economic trends -- 13,000 is an arbitrary marker with investing substance behind it.
Call it the best of both worlds.
Alas, what goes up ...
... usually comes down. Consider, by way of dramatic (and protracted) example, the meltdown that began in early 2000.
As you may painfully recall, the market tumbled hard then -- and for quite a long time. Indeed, between March of that year and the close of 2002, the S&P-tracking SPDRs (SPY), whose top 10 holdings currently include Procter & Gamble
With those cautionary tales in mind, savvy investors should strive to ensure that their basket of investments is spread intelligently across the market's valuation spectrum. Buttoned-down "value" stocks, for example, tend to hold up better than growth-oriented fare does during downturns.
Case in point: During the period cited above, the Russell 1000 Value bogey -- which specializes in the lower price-to-earnings likes of Wells Fargo
Things are looking up
Some investors, meanwhile, actually made money over that stretch. While I headed up Champion Funds, I recommended a fund that posted a gain of more than 28% while the aforementioned indexes were headed south. This fund, in other words, played a mean defense, and over time, its rewards have been plentiful.
The Foolish bottom line
Contrarian that I am, I think a great way to celebrate any market milestone or to invest during pullbacks is by reviewing your portfolio to ensure that you have a well-diversified, comprehensive group of both funds and stocks that are sure to see you through bull markets and bears.
Sound interesting? Good deal. You can snag a special free report – “The 11-Minute Millionaire” -- and learn more about the Fool's set-and-forget investment service, Ready-Made Millionaire. RMM features a high-octane ETF, a clutch of Grade A mutual funds that span the globe (and the market's valuation spectrum), and four stocks that we believe are poised for outperformance over next three to five years and beyond. We're so confident in our lineup up that the Fool has plunked down a million bucks on the portfolio. We're currently closed to new members, but just click here to grab the free report -- and to be notified when we reopen.
This is an updated version of an article first published April 24, 2007.
Shannon Zimmerman doesn't own any of the securities mentioned above. Apple and Costco are Motley Fool Stock Advisor recommendations. Home Depot is an Inside Value pick. Johnson & Johnson is an Income Investor selection. The Fool owns shares of SPDRs. You can check out the Fool's strict disclosure policy by clicking right here.
More from The Motley Fool
You Need to Hear the SEC's Warning on Cryptocurrencies and ICOs
Before you invest in the next hot ICO, here's what you need to know.
Americans Say It Takes $2.4 Million to Be Wealthy. Here's How to Get There in Time for Retirement
Think you'll never be a millionaire? It's easier than you might expect.
Better Buy: Amazon.com, Inc. vs. Google
We pit these two market titans against each other to see which is the best investment today.