Stop and Listen
Have you ever actually paid attention to the experts that comment on stock and bond market movements? I mean, beyond just listening abstractly for the next great stock tip on CNBC or BNN while you prepare dinner or drink your morning coffee?
If you do pay attention, listen over the course of a volatile week in the markets and you’ll begin to notice the plug-n-play nature of the headlines:
Stocks head lower as uncertainty over “fill in the blank” increases.
Optimism over “fill in the blank” drives markets higher.
“Fill in the blank”’s comments cause wild gyrations in world markets.
Markets expected to rise at the open because of “fill in the blank.”
Often, contradictory messages and predictions appear within 24 hours as markets rise and fall rapidly. “Fed comments indicate monetary easing, markets shoot up… On closer analysis, Fed comments indicate tightening, markets dive…”
Fear and Greed
If you sift through the jargon, it comes down to markets being driven by the same thing as pretty much everything else in our lives – human desires – fear and greed, optimism and pessimism, attraction and repulsion, need to be liked, etc. And this is all well and good if we realize this and act accordingly…
It isn’t so great, and can be downright harmful to our financial health, if we believe that other reasons, which we can divine and predict, drive market prices.
In the words of Winnie the Pooh, or some other cartoon character, “What to do, what to do?”
Step One: Stop listening to, reading or watching the news.
Step Two: If you can’t quit cold turkey, listen, watch or read, but ignore.
Step Three: Unless you work with a professional money manager with a strong track record who you believe will continue to perform well or if you have a functioning Magic 8 ball, emotional control unlike 99.9% of the population, and the time, energy and interest to do your own research and come to your own conclusions, and, finally, act based on knowing that prices will primarily be driven by others’ emotions, stay out of the market.
Step Four: If you aren’t going to be in the market, find Alternative Income Strategies that provide a consistent and relatively high rate of return.