October 19, 2012 was the twenty fifth anniversary of the 1987 stock market crash. On October 19, 1987 the S&P 500 dropped 20%. It was a gut wrenching time for all investors.
Coincidentally or perhaps not, the prognosticators are predicting a similar crash will happen again. Granted we are experiencing some very turbulent times in the global economic environment. And we will experience a sharp downturn at some point, however, I nor anyone else can tell you when.
What these prognosticators are trying to do is strike fear into the investing public. These Wall Street bullies are looking for an increase in trading. These bullies want you to move your money from one asset class to another. Remember they make money on every transaction, whether you make money or not.
Wall Street has a product for every situation. And they know the investing public is constantly searching for the next big ‘thing’.
Investors’ real goal is stock market returns with Treasury bill risk.
This is unattainable. Remember, where there is no risk there is no reward. This is true in all other areas of our lives, not just the stock market.
What we must remember is that stock market or equity risk is only part of the problem. Inflation risk is the most destructive to your savings over the long term. It is constant and unrelentingly eating away at your purchasing power.
Owning equities or stocks may be the best way to combat inflation risk.
The most successful investors of all time have one strategy, a strategy that does not always look great, but over time leads to success. These successful investors are not always looking for the next great strategy. At times they will look like they do not know what they are doing. These successful investors know risk is unavoidable.
It has been proven time and again that market timing DOES NOT work. This is evident during the 2008 crisis, there was a number of advisers who took their clients to cash. You must ask yourself. Do you really believe these same advisers will be right again? Not only must they be right on getting out of the market, they must also be right about getting back in. Research has proven that this is NOT done consistently.
Investing for a long term goal such as retirement requires patience, a prudent strategy and discipline. This, in most cases, requires the assistance of a good coach. A good coach will guide you in following these three simple investing rules.
Own equities….globally diversify…..rebalance.
To succeed in reaching your long term financial goals you don’t need to know everything about investing, but you do need to know the right things