From my family to you and yours, wishing you a…
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Meanwhile, Mr. Market…
…seems not to be in the holiday spirit this year. Unless it is ghosts of corrections past.
From a high of ~2941, the S&P 500 is down 474 points (as I write) for a 16% decline. Solidly in correction territory and pushing toward a full Bear Market, defined as a 20%+ decline. Will we get there? Nobody knows. Not even, and maybe especially, those on TV claiming they do.
Could be we’ll blow past -20% into something really nasty. Could be we bounce back to new highs. Could be we meander along around these levels for sometime.
The important thing to keep in mind is that this is all perfectly normal. The market is, and always will be volatile. Enduring this volatility is the price we pay for the market’s wealth building power over time.
Here’s what you should NOT do:
Sell, try to time the market bottom and then get back in. Great in theory and extraordinarily powerful if you could make it work. You can’t. No one can. How do I know? As I’ve said before, anyone who could time the market in this fashion would be far richer and more lionized than Warren Buffett. Yeah, I haven’t heard of that person either.
Here’s what you should do if you are in the Wealth Building Stage:
Stay the course and keep buying shares.
Here’s what you should do if you are in the Wealth Preservation Stage:
Consider adjusting your asset allocation, moving a bit from your bonds to your stocks and keeping your target percentages in line. This is how we “buy low and sell high.”
This volatile and correcting market is also a great chance for a “gut check.” Does it make you:
- Yawn, roll over and go back to sleep?
- Rub your hands in gleeful greedy anticipation of buying more shares more cheaply?
- Chew your nails down to the quick?
- Check your fund price daily?
- Watch hours of investment gurus?*
- Toss and turn, waking up in a cold sweat?
*How to be a stock market guru
If the first two are you, you’re good to go. If the last four are more what you are feeling, that is important to know.
This is a great test to see how you really feel about stock market declines. It is all too easy to say they won’t bother you when the market is going up. Far tougher when it is falling. And it can, and at some point will, get much uglier than this. If you panic and sell when it happens, my advice here on the blog and in my book will leave you bleeding by the side of the road.
Perhaps it is time to consider…
Why you should NOT be in the stock market
Know thyself, as the philosophers say. And if in doing so, you decide the volatility of the market is not for you there are alternatives. It’s not for my pal Mr. Moose. Here’s how he stays WARM:
Sleeping soundly thru a market crash
Enough. Be of good cheer. Learn what this market has to teach you and remember, this too shall pass.
OK, back to your figgy pudding…
and here’s to…
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Chart posted by “Jack Damn” on StockTwits…
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And mostly for the better
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New Podcast
Doug Nordman of The Military Guide, Jane and myself had a blast being interviewed for this episode of the What’s Up Next podcast:
How to Raise Financially Responsible Children
Some fun outtakes at the end, too.
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Old Post
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Here’s an absolutely awesome holiday idea:
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Think you have free will? Think you see the world as it really is? Think again.
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