The Market’s Conundrum
July 28, 2017
A confusing and difficult problem or question.
“One of the most difficult conundrums for the experts.”
Synonyms: problem, difficult question, difficulty, quandary, dilemma, informal poser
There’s a conundrum in the market right now for a lot of people, and it’s the question of whether to get back into stocks when they’re trading near all-time highs.
It’s easy to understand the anxiety associated with such a decision after millions of Americans lost billions of dollars in the stock market crashes that happened within seven years of each other. But one of the main reasons people lost so much is that they panicked and lost faith in the system as well as the companies in their portfolios.
A lot of those companies have been around a century or longer and have demonstrated the ability to adapt to changes even while their underlying share prices sagged. In other words, they didn’t go out of business. I’m sure some of you are thinking about Eastman Kodak (KODK) and Sears Holdings (SHLD), but let me you this: When you did stop using Kodak film and shopping at Sears? I bet it was long before the bottom fell out of their respective stock prices.
The moral of the story is that deep down, most folks know what’s happening long before the news reaches the ivory tower and fancy spreadsheets of Wall Street. You just have to keep your eyes and ears open.
In an ideal world, we would all understand the cyclical nature of the economy and stock market. I’ve read every single issue of the Forbes 400 Richest list since its inception and the one concurrent theme is ownership. Most of the folks on the list have assets that have increased in value and earned them money while they were sleeping or frolicking on a beach.
Of those assets, much of the wealth is steeped in stock ownership.
The key is understanding your goals and mentality. Buying and owning stocks is about an emotional quotient just as much as an intelligence one. This is not to say that the market will morph to your anxieties, but there are approaches that could mitigate those anxieties and let you sleep better at night.
But it’s very important to keep in mind that with investing comes risks, and there will certainly be challenges along the way. It’s not a random walk in the park.
To be successful, you must primarily be in it for the longer term. You don’t have to have all of your funds committed at all times, and there is a place for trading dollars as well, but you do need to be connected to news and developments and positioned to buy and sell.
Perfect hindsight is fine as a learning exercise, but it shouldn’t become mired with doubt that stops forward progress. One of the biggest mistakes investors make is dwelling on a big loss or holding a broken-down position. Or refusing to take on fresh ones.
I firmly believe that now is the time to be invested. Yes, there will be bumps along the road. But the only way to build long-term wealth is by becoming a part owner of the great American companies leading the charge into the new world.