When it comes to the stock market, beware of this F-Word!
The stock market goes up and the stock market goes ______________! What word(s) would you put in the blank space?
Does it go…
“through the roof!”
Ok…I know…those are dumb answers and you already know what the answer is. Besides, who would ever say, "upper"? Right?
As we all know, the stock market goes up and the market goes DOWN.
If that’s what you put down as your answer, give yourself a shiny sticker. You know your stock market well!
However, as basic and primary as this idea may seem, you may be surprised to know how many people answer it correctly on a quiz like this but fail to remember it when the stock market goes bonkers.
When they do, it’s usually because they forgot to be aware of this potentially crippling and dangerous F-word.
The Stock Market and FEAR
I’m not a swearer (or is it curser?). Either way, my vocabulary stays pretty clean and Christian — unless it involves Michigan losing a football game or making a bad play. But I’m getting better at controlling that, too.
So when I mention an “F-word”, I’m not thinking of naughty words. I’m thinking of one word in particular:
I used to work as a financial advisor for more than a decade. I would travel across the country and help people manage their investments and retirement funds and I helped them create plans that matched their financial goals and objectives.
During that time, I would always have to address (over and over again) the 2 big, dirty words that cause the most damage and heartache to a persons financial portfolio. (NOTE: if you’re thinking the answer is “Democrats and Republicans” I will let that count as well!)
Fear and Greed.
Those two words have caused more damage than any other.
One causes you to panic and believe that “the sky is falling” and the other makes you believe that it will always be sunny and you will never lose money.
But are dumb and detrimental to wise financial stewardship.
As I write this today, the stock markets have been very turbulent. To say the least.
Shortly after the new year, the stock market rose to all-time highs and the Dow Jones reached the 25,000 point barrier for the first time ever.
But do you remember how we started this conversation out?
What comes up (we said) must come down.
And it did!
On a Friday in February it dropped by over 500 points and the following Monday the F-word spread and the Dow Jones closed down another 1,100 points!
People began to panic and the sky began to fall. Or so the media would have you believe.
Which brings me to an insider secret that can save you a lot of heartache and grief. But please don’t pass this secret information on except to the savviest of investors that you know.
Here’s the secret:
The media’s job is to get you to watch and pay attention to them. What's the best way for them to get your attention in a crowded, noisy world? FEAR!
You HAVE to understand this and how it affects what you see and hear when the stock market goes up and comes down.
As we all know (but often forget): Not everything is as it seems!
So as you watch your money go up and down the see-saw we call the stock market, remember to keep your fear in check.
- Are you getting ready to cash in your money or do you still have a long time-horizon until you do so?
- Did you really think that you’d invest in the stock market and ONLY make money?
- Is ALL of your money losing value or do you have a diversified plan in place for moments just like this?
Be wise and understand the principles of the stock market. It goes up and it goes down.
Fear not, my friends.
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