What The Hell Is Going On?

With all the good economic news and public companies reporting better earnings than last year you may be wondering, why is the stock market continuing to fall. 

Investors need to remember there are two kinds of people who buy stock, the first one is the long-term investors, they are the smartest investors who buy companies (stock/equities) based on valuations and the fundamentals. They generally do not often buy and sell. It also has been proven they have very good long-term returns. You can spot these investors because they are generally calm in nature and have a large investment portfolio which they have built over the years. You don’t hear much about these investors because they are considered boring since they don’t do a lot of trading.

The second group are the traders who receive all the limelight for buying and selling. At a party they are the ones which usually have the most to say about their excessive moves in and out of stocks and they always make themselves sound right. However, traders are the big cause of volatility in the market and it does not demonstrate the true value of many businesses which investors are invested in. Traders generally don’t have good long-term track records which is the reason that after five years or, so you don’t hear about them any longer.

Currently, I believe all the trading which is going on is based on fear of rising interest rates, the trade talks and the election to be held in a couple of weeks. 

So, what should you do to prevent making a big investment mistake which could cost you thousands if not tens of thousands of dollars and perhaps delay your retirement or worse reduce your income during your golden years?

It’s easy to say don’t panic and stay the course but we are emotional human beings. We are taught as we grow older to avoid immediate pain. If it feels bad it must be bad. It is so ironic when the market drops we can see an increase in appointment cancellations. Yet when the market is reaching new highs everyone wants to invest. 

We all know we are supposed to buy low and sell high but if you believe you are going to buy at the absolute bottom and sell at the absolute top, you have already set yourself up for failure. An investor must be reasonable and understanding. You will never buy at the absolute bottom or sell at the absolute top, you may get lucky once or twice. The truly successful long-term investors such as Warren Buffet, David Dreman and Benjamin Graham don’t even pay attention to the market. They focus on what the business is doing for the next three to five years and what the value of that business will then be, not in the next three to five days. They also realize that just because a stock is down 10-25% doesn’t automatically make it a bad investment. 

If you truly want to make money investing, stop looking at short term returns they are not an indicator of your long-term results. If you are just guessing on investing or your advisor has no idea of what he or she is doing and can’t give you a reasonable explanation of what they are doing, then maybe you are doing business with a salesperson rather than a true investment advisor who really knows and can explain the reasons behind what they are doing. 

If you have good quality equities stay the course, if you’re not sure what you have in your portfolio, have it checked by someone who knows investing and is not just a salesperson. If you find the right advisor and take the time to listen about how to really invest, you will sleep better at night and your long-term investment performance will be something you can live with. If you’re not sure who that right person is then contact me or Chase Wilsey, we would be more than happy to sit down with you and explain the fundamentals of real investing.