Courtesy Sterling Manor Financial
By Stephen Kyne
From its peak in May of 2015 to new records set in July of this year, the markets have suffered two corrections.
If there’s been a theme to the last year of investing, it is volatility. In spite of that volatility, however, it remains true that long-term investments in the markets provide positive returns over time, as long as the investor possesses the discipline to remain invested. Many don’t.
As a result, most individual investors buy high and sell low; emotions cause them to flee the markets as they hit lows, locking-in losses, and remain out of the markets through periods of recovery, only to enthusiastically jump back in in time for the next pullback.
Emotions have no place in investing.
Remember that there are two sides to every trade. In order for you to sell that investment at the bottom of a market correction, someone else has to be willing to buy it. If the investment is such a dog, what does that person know that you don’t? Sometimes you’ll be right, but many times the buyer recognizes that the low price represents a deep discount, and is eager to let you sell them something on sale.
Emotional investment decisions are often instigated by what you perceive to be true based on exposure to the media. Remember, the news never shows the house that didn’t burn down, nor all the people who made it home safely last night. Media exists to sell advertising, and sensationalism puts butts in the seats. Consequently, every little problem in the world becomes inflated to that end. This year’s election is a perfect example.