August 31, 2011
Think back - not far, just three weeks ago: we had a pretty bumpy ride in the stock market, down nearly 18% in the last week of July and the first week of August. Bumpy enough to get the media on the case. Local TV, radio, and print media all called and we were happy to oblige with quotes and commentary. Their inevitable question: "What should investors do?" was met with my inevitable answer: "Don't panic, be patient."
How much do I believe my own advice? It's tough, at least when we're in the middle of a steep slide. There's always the chance that "this time it will be different," and the market will keep sliding to some unknown low place. And there is difference in the details, around the edges. But in the main it is the same, and life goes on. After all, markets are driven by people, millions of people, and human nature does not change. And my faith in the need to be patient is confirmed.
So what happened to investors who panicked? If they got out in early August, they missed a sharp ride back up. No, we're not back to the levels we saw in mid-July, but the major market indices are up a solid 10% from the lows of three weeks ago. Does that mean all investors should own stocks or growth mutual funds? No. But if good long-term performance appeals more than a stable return of one-half of 1%, then get used to volatility and take the long view. Volatility has its returns.
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).