Feb. 27, 2007
Tuesday's stock market action was fairly chaotic and painful on the downside as stock prices across the board fell significantly. The Dow Industrials, Nasdaq Composite and S&P 500 Indices fell 3.3% to 3.9%. Hopefully, you had time to relax after work and have a nice dinner before turning on the television set and checking the financial news on the grim details.
Speaking of financial news, the popular networks, CNN, CNBC, Fox, etc. do not do much to calm anyone. Their job, in my opinion, is to squawk louder and louder in your ear, creating doubts in your mind, and often cause investors to make the wrong decisions. Decisions that your emotions cause you to do over acting rationally. They harp, "Biggest down day since March 24th, 2003", "Worst day for the S&P 500 Index since Sept. 17, 2001" (the first day the markets reopened after 9-11). Their job is to keep your eyeballs and ear drums tuned in. The show titles are silly; Mad Money and Fast Money. The investing game is characterized like going to Las Vegas with a pair of dice where everyone can win every day.
Putting the stock market in perspective, the action today basically erased about 7 weeks of gains, since the beginning of 2007. Whoop-de-doo! Are you planning to use your retirement plan, 401-k or other investment accounts tomorrow? Most of us are not. If you own stocks directly or through mutual funds, as 92 million American's do, you should understand that investing is a life long endeavor - a multi year marathon, not a morning 100 yard dash.
Here are some common sense tidbits of advice I can dish out from my 25 years of managing money.
1> Have a game plan in place - what level of loss can you live with? 10%, 15%, 25%.
2> Review your performance for last year. Get your year-end 2006 gain/loss statement and look it over. Were your decisions good, bad, ugly? What can you learn and improve upon from your investing.
3> Avoid making big bets or switching in and out of stocks or funds frequently. Scale in or out gradually over the weeks and your performance will be more even-keeled.
4> Rarely be fully invested in stocks. Have some cash or bond funds around to take advantage
of opportunities to buy or add to your favorite stocks or funds when they go on-sale.
5> Think long term, 5-10-15 or more years. It's time that will make you richer, not timing.
6> If you still toss and turn at night and can't handle investing yourself, hire a professional to manage your money for you.
If you would like some safe money alternatives es to investing in the stock market, be the first to call or e-mail me and I'll send you an informative book, Safe Money Places.
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