As usual, Washington DC is in turmoil. In fact, we are now in a government shutdown. This is day three and so far, I have not noticed any changes. Of course, only non-essential government services are shutdown. And even the essential services, like our military, are working but may not get paid.
Another ‘essential’ service, Congress, is not working and getting paid. Somehow this does not make sense to me.
There are those that believe that the markets will go down as a result and we should exit the market. At least until things calm down.
During these times of crisis, we have a tendency to make emotional decisions. Decisions that are NOT in our own best interests.
Ideally, we should all just time the market cycles and only buy when the market is low and sell when the market is high. Unfortunately, few, if any investors are able to do this with any consistency.
We tend to make our investment decisions based on recent past events and how we feel about those events.
If the market has done well lately, we are comfortable buying stocks. If the market has done poorly, however, we avoid them. Unfortunately, this is the exact opposite of what we should do if our goal is to maximize our long term return. And you follow the first rule of investing, buy low…sell high.
Once we feel “comfortable” with the market, we have usually already passed up large potential gains. The stock market is forward looking and usually starts trending upwards between 6 to 9 months ahead of the economy actually recovering from a down cycle.
There is an unholy alliance between the media and the large financial institutions to convince the investing public to continue trading by spreading fear and panic.
Many investors mistakenly believe that the big brokerage firms make money by trading in and out of the ‘right’ investments. This totally wrong.
The large financial institutions make money when YOU trade in and out, making money on every trade.
You should own equities…globally diversify…rebalance and believe that America and the capital markets will prosper. We as a country have been thru much worse and we recovered and became stronger.
The problem is no one can consistently predict what will happen and when.
During times of crisis should we cut and run or should we stand and fight? Historically the fighters are the ones that profit and prosper. Those that cut and run grasp unto their ‘guarantees’ and wonder why they are always behind.
America was built by those that stood and fought.
To best deal with the inevitable ‘bad’ times fire your broker/agent and hire an investor coach/fiduciary adviser.