The Latest News From The Motley Fool: A lesson in real life

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LAST WEEK was a roller-coaster ride for stock market investors. Yet it all started well for market watchers, as on Monday the FT-SE 100 closed up 95 points at another new high.

On that same Monday evening, Wall Street closed down just over 50 points. Nothing unusual in that, you may think, but earlier in the day the Dow Jones was up a staggering 270 points. A 330-point intra-day reversal had the market bears sharpening their claws.

On top of that, the technology-dominated US Nasdaq index plunged more than 5 per cent in just one day's trading. Given that a market correction is usually defined as a 10 per cent fall, the Nasdaq was half way there in just one session. Visions of October 1987?

Most Fools are aware of the exceptionally strong performance of internet shares in the past year. Companies such as AOL, Amazon.com, eBay and Yahoo! are quoted on the Nasdaq. These companies are seen by many to be the market leaders of the new world. Yet each took a hammering, as the US internet index sank almost 13 per cent. For those people who had been saying these shares were wildly overvalued - and they have been saying it for a long time, even though they have gained about 300 per cent - they finally felt some sense of justification and satisfaction.

Naturally, Tuesday saw the London stock market follow Wall Street's lead and by the end of the day, the FT-SE 100 had plunged almost 200 points. However, in the general context of the stock market, this fall was of little significance. The FT-SE 100 was still up more than 7 per cent since January 1999.

The market tends to rise relentlessly and occasionally falls quickly, yet the latter event is the only one that makes the headlines. Is it any wonder that most of the general public do not invest directly in the stock market?

Here in the UK, we have very few pure internet shares. Over time, that should change. Dixons, better known for its high street stores, owns Freeserve, the country's biggest internet service provider (ISP). On Tuesday, its shares short circuited for a 108p fall, or an 8 per cent drop.

The telecommunication companies, beneficiaries of the net boom, suffered too, with Energis similarly seeing 8 per cent chopped from its market value.

Despite Tuesday's carnage, the markets bounced back. At the moment, they are nothing if not resilient.

However, this will not always be the case, as the Asian crisis has shown. Although the stock market has managed to get through this week's volatility relatively unscathed, history says that this won't always be the case.

So should you be selling out now? That is something only you can decide for yourself. Markets will continue to swing wildly, and this is something investors will have to stomach. It goes with the territory. But, only those with the ability to stick out the bad times as well as enjoy the good - over the long term - will be the winners.

Motley Fool, www.fool.co.uk