In the last few days I have heard several comments on the network from on air personalities saying how ticked or mad comments when the market is down or "you must be happy" types of comments on up days.This does a disservice to anyone who might be new to the markets as it encourages people to assign emotions to otherwise normal market action.
I doubt the current trading elicits too much of an emotional response from people so saying don't get worked up may be obvious but in all likelihood the chance to succumb to emotion will occur again.
So if your response today to don't get worked up is no kidding, hopefully you will remember that response if the market does in fact slide off the mountain again.
6 comments:
Roger, appreciate the post. The only up trend right now is in a narrow market width. I have a question re a lazy portfolio. Suppose one allocates a certain percentage of assets to it, and another part to trades, or aggressive investments. Is there any consensus (within a range of agreement, of course) on slices of the pie for each? I can't find an answer anywhere I've looked. Thanks, John
John I'm sorry but I'm not sure how the answer can be anything but based on the individual's tolerance for volatility.
I am inclined to think that of the group of people would not want a normal diversified portfolio but instead prefer some sort of mix as you frame it would go very heavy lazy versus the trading account.
Roger, thanks. I think you have it about right. I belong to that group of which you speak. I am trying to decide on a mix. Maybe 70% lazy and 30% active. Just haven't worked it out yet. I thought maybe there is a school (or schools) of thought on the question. John
Good post, I'm just starting to get to grips with the psychology of investing. I zig and zag between wanting 20%+ returns per year to just breaking even. I keep an eye on investments I sell and if I'd sat on my hands since last September I'd be doing better than I am now. Go figure.
Roger, I'm worried about inflation more than the market sliding away. Is there any historical evidence that stock markets tend to beat inflation?
Just for an example if inflation (including food and energy) is higher than average for the next decade or so, what are the chances a well balanced portfolio will equal or beat this?
I don't have a white paper to point you to.
Some have said that inflation can be followed through the price of a first class postage stamp and I buy into this notion.
On May 10 1993 the stamp cost $0.29, remember the Elvis stamp, and the S&P 500 closed at 442.80.
I think stamps are going up on Monday to $0.42, a 44% jump in 15 years. The S&P 500, if I figure it right, is up 215%.
On May 10 1998 the stamp was either $0.32 or $0.33 and the S&P 500 was at 1108.14.
Assuming $0.32 the move up to $0.42 works out to 31%. For equities the gain was 25%.
You will likely draw your own conclusion but given the big round trip to nowhere this decade and how rarely that happens I think it is a good bet that equities would cover inflation even if more of your return needs to come from overseas.
Oh absolutely the round trip was a once in a lifetime occurrence, I truly believe that. The irrationality of the dot com era could only be achieved once again with some profound technological boost such as a very, very cheap way to harness an abundant energy source (if only!).
As to owning a part of foreign equities that's done and DONE. Brazil and China seem to be motoring right now plus their currencies are strengthening against the dollar and pound. Russia's and Brazil's economies are doing well too. They all need resources and energy to fulfill their aims of being equals to the developed economies after languishing on the sidelines for so many years. It's the creation of a new World order we could be seeing here, not to say they can overtake the US or Europe just that the growing sectors could be dominated by these countries for quite a while yet.
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