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Ch-ch-changes, self-mastery and the stock market

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zenmarketFear, greed and change

The more things in the market change, the more they stay the same

Ah, the markets … If you want to do a great study on fear and greed, look no further.

In summer 2012, I posted Is it better to have invested, and lost investing, than never to have invested at all? (There may have been a little bit of cheek in that title.) The market had taken a bit of a beating after hitting highs in early 2012. Investors were piling into bonds, driving bonds higher and higher. Everybody was piling into Apple, and Apple would soon make an all-time high.

I still don’t know what I was waiting for
And my time was running wild
A million dead-end streets
Every time I thought I’d got it made
It seemed the taste was not so sweet
So I turned myself to face me
But I’ve never caught a glimpse
Of how the others must see the faker
I’m much too fast to take that test

— Changes, David Bowie

Ch-ch-changes: Turn and face the strain

Just when many investors had given up on the markets and run to bonds, bonds peaked and the markets went on a tear. To date:

  • European and U.S. stocks outperformed
  • Many had avoided European and U.S. stocks because of the various end-of-the-world scenarios hitting the headlines hard at the time
  • Apple began its more than 33 per cent decline, losing one-third of its value or more than $230 billion
  • RIM (now Blackberry) more than doubled in value (though it has pulled back lately)
  • Government bonds/treasuries haven’t done a lot while the stock markets have done well
  • Dividend-paying stocks had a good year
  • Gold didn’t glitter
  • More than $140 billion of announced U.S. M&A deals in February alone

Fashionably late doesn’t work in the markets

Suddenly, retail investors felt they might be missing the party. And they were. As these investors came back, a virtual upward spiral led to:

But, is this different than what’s gone before?

Financial information burning holes in space

The avalanche of information that surrounds the stock markets and much larger bond markets is daunting to say the least. Few can digest the information outside of financial professionals. Even Warren Buffett, by far the most successful investor I can think of, will tell you financial professionals don’t know exactly what the market’s going to do — and Buffet says he doesn’t care, in the short-term.

So, what’s an investor to do in the digital age when information travels so fast it seems to burn holes in space?*

Eat what’s good for you

Well, the flood of information’s always been there. The tools of dissemination have just changed. You still need to be intelligent about what you consume.

If you have a good plan, and the conviction to stick with a good plan, you will do well as an investor over time. Being an investor is sort of like being a business owner. You have to be strategic, and you have to devote some time to future growth. That was true fifty years ago, and it’s true today.

More wrong than right

Boys and girls who cry wolf will eventually be right, but are more wrong than right

Mayan calendars, financial crises and the boys and girls who cry wolf will test the mettle of who you are and what you plan to do. It’s always been that way, and it’ll always be that way.

There will be corrections, but there will be long moves forward. You’ll read about high fees and why ETFs** are better than mutual funds, and, in some cases that’s very true, but, what’s even more true is:

  • If you’re avoiding the markets because you’re overwhelmed with information, talk of high fees and the fear that the end is nigh, remember there will always be reasons to set your hair on fire. Markets will correct. Markets will advance. And you’ll always be able to find bad news if you look for it.

The strategy of sticking to your strategy

Get a strategy. Stick to it.

Despite everything, the stock market is still the greatest engine for wealth creation the world has ever seen, and mutual funds are the single easiest investment for the average investor to participate in. The 1 per cent have known about equity markets for a very long time. Information about wealth creation has been widely available for a long time.

While the world may be changing rapidly, especially with respect to communications, investing basics, for the average person, haven’t changed. In a sea of change, there’s still a pattern that holds true.

Keep working your garden

I once watched a gardener working on a Japanese garden. Imagine if he changed his plan every hour and began creating a different garden … Would he ever achieve the aesthetic harmony he set out to?

What separates people from the rest of the animal kingdom is our ability to use our minds. If wealth creation, concerns over retirement or just understanding the great forces at work around us register with you, take a few steps forward.

If you’ve ever watched a baby learn to walk, the kid who’s running like the wind a couple of years later first learned to move forward with a few wobbly steps leading to some serious tumbles as ambition and confidence grew.

Want more information about investing?

Get informed.

Click here for more about bonds/fixed income investments.

Click below for more about asset allocation and reallocation strategies:

Get the balance right

A simple way to arrive at the right asset allocation for your portfolio

Plan like a pension fund manager when it comes to your investment portfolio

Let’s think about assets

Asset allocation: Diversification is king

Click here for articles about dividends/dividend-payers.

Click here for a collection of articles about investing.

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*I’m a fan of social media when used judiciously. Please see my post Social cosmology: Social media is creating its own multiverse and the series of posts that came before it.
**ETFs are wonderful products, but you need to have a trading account in order to buy them. If you’re struggling to keep track of your mutual funds, a trading account may require more time than you’re willing to invest.

Related articles:

$1 Million Invested in Stocks in 1935 is Worth $2.4 Billion Today (If You Held On) (

Teachers’ Pension CEO Says Plan Should Take More Risk (


Written by johnrondina

February 19, 2013 at 4:05 pm

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