Wednesday, June 15, 2011

What Do You Think About This Market?

This is a question that I often get at social events, especially when markets have been down - So, what do you think about this market?  Anyone who knows me well enough knows that my general response will be - I don't know? Of course, this doesn't make for interesting conversation, so we usually end up talking about politics, which is about the same as talking about sports or the weather.  

It's not that I don't care about what is happening in the stock market or the economy, it's just that I have learned that having an opinion about short-term market movements isn't useful.  The stock market is volatile, has always been volatile, and will continue to be volatile.  No important financial or investment decision should be made based on this short-term volatility.  

The markets were up big yesterday but are set to open much lower this morning.  What else is new?  We invest in stocks, because they are the chief investments to own over long-term periods of time, when the primary concern is to protect purchasing power - fancy speak for beating out inflation.  When this is your perspective, there is no reason to get worked up about what markets do in a day, a week, or even a month.

In honor of Fathers' Day, I'll finish with this cartoon: