“Being rich is having money; being wealthy is having time.” –Margaret Bonnano
It is important to take a macro versus micro approach to investments, meaning we have to take a very big, long-term view in order to start to make some sense of the stock market. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
Listen for more on how to keep perspective when looking at the market.
Watch my short video or read the transcript below.
Hi there. Mike Brady with Generosity Wealth Management, a comprehensive, full-service financial services firm headquartered right here in Boulder, Colorado.
Today I want to talk about making sense of things. I was meeting with a client a week or two ago and he said Mike, it doesn’t make any sense in the stock market. It’s something that I don’t understand. It goes up high one day and down the next day for a reason that I can’t understand. And my answer to him was stop trying to understand it. Stop trying to understand it on a daily basis, a weekly basis, even a monthly basis because I don’t know the future, you don’t know the future and for us to try to guess the emotions, the intents, the actions of millions of other people is very difficult.
We have to take a very big, long-term view in order to start to make some sense of the stock market. If we’re looking at it from a daily basis, one day if you listen to the newscasters or read some article they always have some reason why it went up like they know definitively what millions of people are thinking. The next day it might completely reverse and then they give a different answer that might be very similar. No, not that many people change from day to day. There are many variables in this equation that we call the market and only by looking at it as we would approach a mosaic by looking back months and even multiple years does it start to make sense.
So you have to look at yourself and your own emotions and say wow, am I going to allow myself to be whipsawed from day to day, from week to week, or am I going to take the long-term view. And your bias is very important to know. If you’re a naturally optimistic person I would argue that history has shown you to be a winner in this because three out of four years going back to 1929 the market has been positive. One out of four years have been negative. That doesn’t mean the future is going to be that way. All I can really say is that historically that has been the average when we look at many multiple years, many five-year, ten-year and twenty-year time horizons. Those that are pessimistic and are trying to time the market are worse off than those that say hey listen, I’m going to take a long-term view. On average I am going to be the winner. Sort of like going to a casino and you get to be the house. You don’t get to win every single hand but over time you certainly are the winners.
And so the future is never certain. It could be different in the future but this is what I think would be a better approach for most people.
Mike Brady, Generosity Wealth Management, 303-747-6455. I’m always here if you want to talk. Thank you. Bye bye.