I do not have the funds to be an investor, but reading headlines on a regular basis, I sometimes wonder if these “Captains Of Industry” have a clue.
From this outsider’s opinion, it seems if George Bush gets the sniffles, there is a mass exodus and the whole world screams SELL!
But f Pooperscoopers.com announces they are going to turn a profit of .001 cent this quarter, the talking heads scream BUY!
It seems scary to think a stupid rumor started on the internet by a high school kid in Taiwan could potentially cause grown men to sell off a couple hundred million in stock.
Is there any ryhme or reason behind this skittish behavior, or are stock market investors just rich fatfolk without backbones.
Well, over half the American population is invested in the stock market, either directly or through mutual funds, so they aren’t all “rich fat folk without backbones.”
Anyway, over a long time horizon, stocks have historically been the best place to put your money – their return beats bonds and bank accounts by a long shot. The price you pay is in short-term swings that are sometimes scary. That doesn’t mean you have to be a “Lemming” or a “Psycho” to be in the market. Quite the contrary, in fact.
Thanks, Dewey…the “short term swings” is actually what my less than serious rant is about.
I do not understand how things can go from truly horrible a few months ago, to damn good today…and it seems go through these “short term swings” more often now than I ever remember it doing in the past.
What is making the stock market so ridiculously unstable on a day to day basis? At a certain point, wouldn’t it be wiser to put cash in a sock and hide it under the bed?
Well, insomuch as anyone can figure the “rationale” behind the decisions made by literally thousands of investors every day, here’s what I’d surmise:
The economy is in a weird place. It’s recovering from a recession, but the recovery is not robust. There is a tangible fear of the economy going south again. On the other hand, there is a lot of good news out there, too. Nobody wants to be caught on the wrong side of where the economy is going, so they latch onto whatever news they can and buy/sell accordingly.
In other words, in a market like this, it’s harder to write off companies with good news(in a bear market) or bad news (in a bull market) as outliers running outside of the dominant trend. Thus, every piece of economic data is overvalued – and the market swings like mad. I think it’ll eventually shake out one way or another, but it is nerve-wracking while it happens.
Anyway, if you need your money in the short term, it’s be better to stay out of the market. If you’re setting it aside for several years, then the market’s a fine place to be. After all, yesterday’s highs are today’s lows – over time, the market moves up; it just takes a squiggly road to get there.