| "In case you haven't noticed, volatility in the stock market has nearly doubled since February 27, the day the Dow Jones industrial average sank more than 416 points. And Wall Street's roller-coaster ride is expected to get even bumpier this week, as the Federal Reserve holds a two-day meeting starting Tuesday to discuss what to do with interest rates." " Right now, consensus is elusive. Some believe the Fed will leave short-term rates alone, as it has done for the past nine months. Others think that given the growing concerns that mortgage defaults are slamming the brakes on the economy, the Fed might start lowering rates sooner than expected, to keep growth afloat." "And still others--a minority, to be sure--think the Fed will actually lift rates again, since there are still signs of brewing inflation. Indeed, last week, the Labor Department reported that its consumer price index, a key gauge of inflation, rose a greater-than-expected 0.4 percent last month." "When there's this much disagreement on Wall Street, it tends to lead to choppy days in the stock market, like the ones investors witnessed last week. Last Thursday, for example, the Dow fell nearly 150 points before roaring back more than 200 points to finish the day up more than 57." "When stock prices bounce up and down so violently, it's only natural for investors to want to hide. But just because volatility is on the rise after years of being dormant doesn't mean you should give up on equities." "In fact, history has shown that investors make most of their money during volatile times such as these." "Analysts at Ned Davis Research recently studied periods when volatility in the Standard & Poor's 500 index has been at least 15 percent above average. In those periods, the blue-chip stock index has gained 14.2 percent annually since 1928. During stretches when market volatility has been at least 15 percent below average, stocks have actually lost 0.1 percent annually." "This is why Richard Bernstein, chief investment strategist for Merrill Lynch, says that "it can be easy to lose sight of the fact that rising volatility can present opportunities for contrarian-minded long-term investors."" "Remember, it's during periods of relative calm--such as the past three years on Wall Street--that investors tend to get complacent about the inherent risks of investing in stocks. When this happens, speculation
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