Tuesday, September 1, 2015

“I’M AS (SCARED) AS HELL AND I’M NOT GONNA TAKE IT ANY MORE”?

9/1/15

Since I refuse to make predictions regarding the direction of the market (See today’s other post, ON THE EDGE OF THE FINANCIAL ABYSS?), what can yours truly say about this market with any degree of certainty?  Perhaps only two things, to wit…

If this market makes you nervous, you’re human, but

If this market makes you really nervous, to the point at which you can’t sleep, you have too much money in the stock market.


As I said in today’s other post, I have no idea if we are at or near a bottom…or top, for that matter (Think about it.)  I don’t know if we are heading into the abyss or if we are on the verge of another multi-year rocket ride.   But I do know that markets go up and markets go down.   While this was becoming increasingly hard to believe from the perspective of the more than doubling of the market from the 2009, markets don’t go up in a straight line…and all the efforts of the wunderkinds of Wall Street won’t change that.   So if you expect stock market returns with bank account stability, you are badly misinformed and/or delusional.


Perhaps the hardest aspect of planning one’s investment strategy is making a realistic, let alone accurate, appraisal of one’s risk tolerance.  We consistently overestimate our risk tolerances when markets are going up and consistently underestimate our risk tolerances when markets are going down.   Today’s market tribulation, and resultant nervousness, may be merely an example of the latter, but, given the magnitude of the market’s move, it is probably more than that.  The current market difficulty is, as yours truly just said, a rare opportunity to take a realistic look at how much, if any, money one should have invested in markets that are subject to the laws of economics, finance, and common sense.

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