Avoiding Stock Market Ups and Downs

You cannot avoid stock market ups and downs. There will always be volatility and changes. Actually, the stock market is a vast auction, and for every seller, there is a buyer. When more people are selling, prices drift downward. When more want to buy, prices increase. Buyers see opportunities where sellers see threats.

There are many situations reported in the financial news of some hotshot investors selling stocks that then increase greatly soon afterward. There are also many news analyses that recommend a stock after a huge run-up, only to see those stocks fall. I always had a question about this. Why didn’t they make the recommendation before the run-up? Or perhaps they were following the crowd or appeasing the crowd to appear they are “with it.” I can relate many such instances. This also indicates to me that many of these self-important analysts do not do the work they are being paid to do and are being trusted to do.

I read a lot of the financial news, watch CNBC in the morning when I can, and talk regularly to clients, colleagues, and investment managers and get widely varying opinions, with each believing they are right. While much of the so-called advice differs, there is one thing that everyone recommends and which I also strongly recommend. That is to have a long-range financial security plan and an investment philosophy that is designed to help you attain your goals and the degree of financial security you need.

I’ve said this so many times, as have all of the investment advisors, that many clients seem to ignore this or treat it as background noise. That is a terrible mistake. You need to plan.

With a proper plan, you would adopt a long-term view. When you do that and believe in and understand the plan, then hopefully, over time, the ups will be more than the downs, and you can survive the downs. With a long-term view, you eventually would develop an immunity to the inevitable periodic downs. You shouldn’t develop an obliviousness to what is happening, but it should be considered as a part of the long journey you would be on to attain your financial security. Pay attention, be aware, but do not get so upset that it would cause you to act precipitously and circumvent your plan.

If you believe that investing in a well-diversified stock portfolio is a reasonable way to allow you to share in the growth of the American economy over at least a seven-year, and more likely a ten or more-year period, then you should consider stocks as part of your portfolio. To determine how much and which stocks, you would have to meet with your CPA, a financial planner or investment advisor.

Whatever you do, you cannot avoid the downs, but with the right plan, you will feel a lot better understanding the long-term view and will look forward to the hopeful eventual ups that should overtake the temporary downs. Get the plan done!