I looked on Google Finance today at the DJIA, and kept backing up the time window until I saw the whole display they had, from 1971 until today (Oct 2011).
It seemed to me that the volatility--the ups and downs--has increased a great deal since the 70s. In fact, it seemed rather steady (climbing smoothly) until about 1997 or so, when it began getting a "jaggier" look to it:
What should the average person make of this, in terms of personal finance decisions? For example, naively, it seems to me that I would rather have been a buy-and-hold investor in the 1971--1997 era, since for the most part I would see modest but steady returns, and I would not have as many "scares" with sharp market drops. Then again, there is an argument that I should prefer volatility, to take advantage of these swings, and buy on the sharp drops.
I am not an investor (yet), but find the volatility kind of off-putting. The ups ad downs get reported each day in the financial news, but the overall take-home is the market is the same place it was in Apr 2010, a year and a half ago.
So, what should the small investor-wannabe make of the era of increased volatility? Why does it occur, and how should it inform our financial decisions?