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.
No comments:
Post a Comment