With the stock market at record highs, many investors are anxious about when the inevitable bear market will arrive. Is there a case for staying invested in the market? How can an investor remain calm and steady?
IS RECENT STOCK MARKET PERFORMANCE TOO MUCH OF A GOOD THING?
- As of August 1, the stock market is up almost 20% since election day.
- Logically, we know bull markets DO NOT last forever.
- There’s even a saying: “No tree grows to the sky.”
WHAT DO YOU TELL INVESTORS WHO ARE HESITANT TO INVEST OR WANT TO GET OUT OF THE STOCK MARKET?
Predicting the markets is a game you can’t win-
- The market climbs a wall of worry: Skepticism is a good thing. When everyone thinks the market is going straight up forever, that’s usually when it changes direction.
- Stock market as leading indicator: The stock market is often considered a leading indicator of the future health of the economy. A rising market implies the economy is getting stronger.
- Institutions are usually fully invested: Institutions represent a large percentage of stock market activity. The public imagines professional investors constantly jumping into and out of the market. In reality they are often fully invested most of the time.
- International markets: the U.S. accounts for 53.2% of global stock market capitalization. There’s plenty of opportunity in the stock markets of established and emerging countries around the world.
WHEN IS IT TIME TO HIRE THE PROS?
If you trade individual stocks and bonds and start to feel anxious or tired, hire a pro — a mutual fund managers or financial planner: You can’t watch the markets continuously. Professional managers can. Although they must stay true to their discipline, they can sit tight, riding through rough times and buying when they see opportunities.
- Investors fear missing out on strong market performance, but people also fear buying at the high and riding the markets down to the low.
- In reality, downturns do not spell disasters – an investor who bought into the markets just before the Great Recession, or dot-com bubble, or crash of 1987, were whole again in two years or less.
- Are you a long-term investor? If so, you have the time horizon to ride things out, even if the market doesn’t continue to rise.
This segment originally aired on WBIR on 8/13/17.