When the Dow drops …
“Patience is the companion of wisdom.” – St. Augustine
At times like these, some investors become restless or fearful and begin to sell. However, I always like to educate myself before making trading decisions. I try to remain patient and keep my long-term portfolio strategy in mind. You can be both cautious and rationale.
While the ultimate decision to buy or sell (and how often) is yours, I wanted to offer you some information that might help you gain some wisdom and perspective, and help you to make more educated choices with your investment strategy.
Perspective: The market is going to rise and fall. Short-term stock market fluctuations happen, and they can occur quickly and often without warning.
Our Approach at FaithBasedInvestor.com: We created faith-based investment portfolios designed for the long-term … Adjusting a long-term financial plan in response to short-term market downturns can be a costly mistake.
The market has certainly seen its share of turbulence through the years, and it often discovers its own remedy. If you were around for Black Monday in 1987, you probably recall the widespread panic that followed. But, you may also recall that in less than two years the market had sprung back, fully regaining the value it had lost by September of 1989.
Fluctuations and corrections happen. Do you remember where the Dow was in 1982? It was in the high 700s. By the start of 2000, it had grown more than 1,500% to sit well above 11,000.
Often, it seems the media is encouraging investors to think in either/or terms – bull or bear, rally or slump. Euphoria or panic. There will always be another “latest headline”, and if you base your investment strategy on the headlines, the chances are you will end up confused and astray from the principles that you are building wealth with.
What is long-term investing? Is three months a long-term investment? What about six months? What about a year? Actually, a long-term investment is typically five years or more. If you’re currently buying and selling stock every few months, you may want to reconsider your strategy. You certainly would not be the only investor with a “love ‘em and leave ‘em” stock trading mentality, but that kind of investing is haphazard and can be very risky. The long-term investor typically looks at their ultimate goal, rather than the immediate future, and attempts to balance risk with potential for reward in their portfolio strategy.
Does patience pay? There are no guarantees. Quick and frequent stock trading might bring big rewards … but it doesn’t happen often. If you’re trying to plan for a long-term goal (like a financially comfortable retirement), make sure to keep a long-term focus. This doesn’t mean stick your head in the sand, but it also doesn’t mean to be shortsighted. In the long run, patience bears fruit!
“Dishonest money dwindles away, but he who gathers money little by little makes it grow.” -Proverbs 13:11 NIV