Dow Jones Industrial Drops 9,956 points…..

That’s not a prediction, 9,956 points is what the Dow Jones Industrial dropped during the down days of 2014. Conversely the up days totaled 11,202 points for 2014. So for investors to realize the up days they need to endure the down days. The net effect for 2014 was positive. There of course will be years when the net effect will be down.

Unfortunately for investors there is no one who can consistently tell you which years will be positive or negative. There will always be volatility in the equity markets. To what degree they are volatile can also NOT be predicted consistently by anyone.

Over the long term equity markets will reward investors if they follow the three simple rules of investing:

  • Own equities and high quality short term fixed income.
  • Globally diversify.
  • Rebalance.

Every investor that I talk with wants to earn stock market returns with Treasury bill risk, including yours truly. What they end up with is Treasury bill returns with stock market risk.

The reality is that the equity markets reward prudent and disciplined investing. Investors need to realize this and learn to live with the volatility. The alternative is to go broke slowly. These equity markets are a great wealth creation tool if they are properly used.

Success in investing does not involve:

  • Stock picking.
  • Market timing. (Getting into and out of the equity markets at the right time)
  • Track record investing(Investing with the ‘hot’ investment managers)

This may sound simple but in most cases it requires the guidance of a coach. As I have mentioned many times successful investing requires prudence and discipline. A coach will supply both.

As an example here in Green Bay we are devastated by yesterday’s Packer loss. There were many things that contributed to that loss but one offers a good example for an investor coach.

With about 2 minutes to play Seattle scored a touchdown pulling within five. No problem Green Bay receives the kickoff and runs out the clock. An on sides kick was Seattle’s only chance.

Brandon Bostick the Packer was coached to block so Jordy Nelson could easily catch the ball. Game over. Well Brandon ignored his coach and jumped up trying to be the hero. It bounced off him, Seattle got the ball and went on to the unlikely win.

The lesson, if you are coachable and willing to listen to your coach you will succeed in investing. If you want to go out on your own and become your own ‘hero’ you might succeed but likely you will fail.

Remember the equity markets will remain volatile and go up and down throughout the year. With your sound strategy and good coaching you will succeed.