Sunday, May 26, 2013

When Investing Follow Your Head Not the Headlines

After going through some of the toughest economic times since the Great Depression, the stock market has been rebounding nicely with the Dow closing above 15,000 for the first time as well as the S&P 500 reaching record highs. Despite the good news, newspaper headlines like "Dow hits 15,000 as investors rush to get in" are causing more harm than good. The problem I see because of all of the positive press the market is getting lately is that many investors think that now is the right time to get back into the market, and it seems that many are rushing back in droves to join the party. For a lot of people who already lost faith in the market after the 2008 crash, I think many of those are setting themselves up for more heart ache by re-entering the market specifically because things are looking great now.

By getting back into the market when the market is soaring will only guarantee that you will be buying shares at a premium, meaning you will be buying high. This is goes against all that we've been taught over the years to "Buy Low and Sell High". Also, it is important to understand that when the market is doing well, this is the time that the risk is at its highest point, meaning there is a greater likelyhood that a drop is coming soon. Conversely, when the market is doing poorly it is the greatest time of opportunity in the market. When the market is down, you have the ability to buy more shares at a cheaper price and then when the market goes back up, even it just a little bit, that is when the growth happens.

Yes, there are people who, I like to call "Professional Stock Watchers" and they may do well, however, I wouldn't recommend that strategy for the average investor. Nobody, not even the experts know what is going to happen in the market tomorrow, so it is very hard to try to time the market. Plus, with Dollar Cost Averaging, you actually benefit from all of the ups and downs in the market over time.

So, am is saying that you shouldn't get back into the market now that the market is doing great? No, because I believe that any time is a good time to get into the market. I am however offering a word of advice that you should not try to time the market. Once you get into the market, you need to realize that this is a long-term proposition and you need to ride out the ups as well as the downs in the market.

Remember that once something is reported as news, it is already history. So, stick to your long-term investing strategy and when you need to make a decision use your head ... not the headlines.

I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any comments, please post them below, otherwise, feel free to contact me.
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