In Today's Market, the Wisdom of Standing Pat

Since the financial crisis sent U.S. stocks to a 13-year low in March 2009, the market has staged its biggest two-year bull run since the Great Depression. The rally has persisted despite high unemployment, the European debt crisis, and a devastating oil spill. Even popular uprisings across the Arab world, which sent oil prices higher, and Japan's earthquake and tsunami on Mar. 11, which led to the threat of a nuclear meltdown, couldn't stop it. After dropping 4 percent over the course of three days, the market recovered. By the end of business on Mar. 21, the Standard & Poor's 500-stock index was up 3 percent for 2011 and 27 percent since July 2. For investors, the whole episode seemed to verify Vanguard founder Jack Bogle's maxim: "Don't just do something, stand there!"

Markets move up, down, and sideways, and it's usually useless to try to gauge the day-to-day meaning of it all. Individual investors often "react on fear, panic out at the wrong times, and always miss the market swing back up," says Joshua A. Scheinker, a wealth manager at Janney Montgomery Scott in Baltimore. Indeed, some investors responded to the Japan news by fleeing the market. Shareholders pulled $8.2 billion from equity mutual funds in the week up to Mar. 16—the biggest outflow since July—while steering a modest $535 million into bond funds.