Monday, June 6, 2011

Is This Supposed Investing “Golden Rule” Inconsistent or What?

Is This Supposed Investing “Golden Rule” Inconsistent or What?

When perilous stock market days like those of this past week occur, we are reminded of this investing golden rule: “Keep your focus on the long-term.” Which is simply another way of saying, “Don’t pay much attention to the here and now.”
Everyone – investors and financial advisors alike – know for a fact that at the end of every single trading day, the stock market could end up higher or lower than it was at the beginning, period! Or so you would think – since there is no other option in between.

Say a financial advisor were to suggest to you that the stock market would always go up, or vice-versa. Wouldn’t you be wise to stay as far away as you could from such a completely delusional guy or gal? Of course you would! If you’ve invested your retirement nest egg in the stock market for a fair amount of time, I’m almost certain there has been at least one occasion when you got a little bit nervous – or perhaps freaked out a whole lot? And I’m guessing that occasion had to do with a time when the market took a huge dip, right? In fact, I’m thinking I would have the same reaction if my nest egg were invested that way.

But the thing that has had me scratching my head for all this time is why this “long-term focus” gets invoked only when things look bleak? I mean, you’ll never hear this explanation on those days when the stock market post huge gains. On those days, you tend to hear something to the effect of, “You’re really missing out if you are not in the market right now – so make a decision to hop in ASAP,” based on the short-term gain, so to speak.

So, on the one hand, don’t get nervous when the stock market dips (because in the long term, whenever that is, you’ll do just fine), but on the other end of the same continuum, get giddy and make a move because, hey, things look good today?

Expectations, Expectations, Expectations 

  • If every investor had a candid discussion with their advisors at the outset, with all the puzzle pieces available, wouldn’t everyone know exactly what they signed up for, and therefore what to expect on any given day?
  • Are investors being presented with all of their available options so that they can choose what they could stomach, in the event of either a huge rally or a giant dip in the market?
  •  Or are their so-called advisors behaving like dictators, offering them only what they (the dictators) think the investors should own?
Only you know the answers to these questions for your situation. However, the plain and simple fact is that it does not have to be that complex at all – because it’s not! Those who know what to expect prepare for it, one way or the other, unless they prefer to leave things up to chance, in which case they still know what to expect and therefore should not act surprised because the one sure thing about the stock market is its unpredictability. 

By the way, isn’t “long term” a mere summation of what happens over the short term? So, if the market keeps taking dips here and there, guess what has to happen when the long term finally rolls around? 
Call today to schedule your complimentary appointment with a strategist at Laser Financial Group so you can have a conversation about the full range of your financial options - both short and long term. 301.949.4449 or


  1. Very interesting. I have a friend who wants pull all his money from the stock market but says he is scared to do so what is the best advice to give?

  2. Anonymous,

    If I were your friend I'd consult with a licensed professioal, have a very detailed discussion about all my "issues" ,and review alternate courses of action. It's generally not a god idea to act solely based on emotions when it comes to money.


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