InvestingPredicting the Markets

Try not to React to the Market’s Moves

By October 16, 2014 October 4th, 2016 No Comments

Will the press back off, now that they have gotten the market volatility they have been clamoring for since the last time the market went down?

Nope. It was just a couple of months ago that I wrote that there were articles every day bemoaning the lack of volatility in the stock market. My response was why is it so bad that we had a very brief respite from market volatility, really for the first time since the 1990s?

Well obviously calmer times in the market couldn’t last forever. Now the press gets to write those scary headlines again, hoping you will panic and keep buying more newspapers or checking for updates online more frequently or tuning in to their TV shows.

Don’t let them win. Don’t give in to the panic. Just as we don’t let the market dictate the timing of our investments, don’t let the press dictate your mood and definitely don’t react to it by changing how you invest.

I don’t want to just beat up on the press. I have lots of good friends and acquaintances who are in the press or who used to be. It’s just the nature of the business to try to hook you. They can’t lead with the story that millions of people went to work today and did a good job of raising their kids and paid their taxes. That wouldn’t sell. Just because it isn’t news, doesn’t mean it isn’t exactly what is happening right now.

Much worse than the press are the financial pundits that they interview who are always making outrageous statements guessing the direction of the markets and acting like it’s a forgone conclusion that things will pan out like they say. They make it seem like you are a fool or a sucker for not listening to them. If you want to see how bad they are at making predictions, Google “bad stock market predictions” and see what the first couple of pages show – it’s a list of predictions that haven’t come true.

Keep in mind that some of the financial pundits, like Bill Gross and Jeff Gundlach are bond guys and are almost always saying to stay away from stocks, so there is no reason to listen to them. One of the funniest and most telling lines I ever saw on Twitter was that Bill Gross wouldn’t recommend stocks if you held a gun to his Corvette.

Also keep in mind that the others, those that manage stock funds, or run companies that do, almost universally have worse long-term track records than the markets they invest in. So while they say they know the direction of the markets, they really don’t. Instead of listening to them and following their advice, you’d be better off owning the markets, like we do.

Stocks go up and down every day. By owning them the way we do we have much better long-term returns than investing in bonds, cash and Real Estate. The volatility and scary headlines are the occasional prices we pay for those returns. If not for the volatility and scary headlines, everybody would invest in stocks and the ultimate returns from them would be much lower.

If you are retired and we discussed your retirement income, the volatility and declines in the market don’t change the viability of your monthly income or the security of your retirement one iota.

If you aren’t retired, and you are saving, you are buying stocks cheaper now and will have higher long-term returns for when you do.

It’s October, and Halloween is right around the corner. If it feels scary to you right now, those feelings will pass. They always have.

Michael Garry Yardley Wealth Management

Author Michael Garry Yardley Wealth Management

Michael Garry is a CERTIFIED FINANCIAL PLANNER™ practitioner and a NAPFA-registered Financial Advisor. He is a member of the National Association of Personal Financial Advisors (NAPFA) and the Financial Planning Association (FPA).

More posts by Michael Garry Yardley Wealth Management