Ordinariness

Alexandre Bridge and Grand Palais, Paris, France_7Ordinary is defined as the “usual or normal condition”. When we look at stock market history, the mere “ordinariness” of short-term market declines is evident. Although about 70% of calendar years witness positive overall stock market returns, the average year will see a decline of about 14% somewhere along the way. Every few years, on average, these declines will be about double the average year decline. This appears fairly “ordinary”, fairly “normal”. Intra year declines should, therefore, be viewed as temporary interruptions within a permanent long term upward trend in stock prices.

So, why then all the hoopla in the media every day about the dangers lurking just around the corner? Because touching an emotional cord is what sells advertising and ultimately keeps the media outlets in business. What is particularly comical is that not only does the media highlight “ordinary” volatility but they assign a cause for the volatility. Endless explanations abound for the minute to minute activity in the markets. Of course, none of this really matters.

The reason none of this matters is that investments themselves are not the destination. Rather, investments are a bridge between where you are today and where you want to be financially at some point in the future. Market declines, even short-term declines, create a frame of reference problem for some investors. A friend, family member or co-worker is always quick to point out how their investment strategy performed last month or last year and this comparison starts a slow but sure march toward behavioral missteps. You forget about your long-term goals, the “why” you invest and fall into the quicksand of irrelevant short-term performance chasing.

Predictions about the market are distractions from your “why”. The key to investing success is focusing on the controllable components and harnessing the market powers for those that you can’t precisely control. Instead of wishing for perfect knowledge of the future, work towards sound long-term choices. Ready for a real conversation?

 

Opt In Image

 

Complete the short form below and gain instant access to the FREE article: Perils of Investing: Solutions to the Top 10 Mistakes Investors Make

  • This field is for validation purposes and should be left unchanged.

, , , , , , ,

No comments yet.

Leave a Reply

Designed by Wired Advisor
Hosted by Zee Creative, Inc.