Markets have a way of scaring even the most patient investor away from a long term strategy. Investing is more complicated today and requires the average investor to understand more. It doesn’t help that we are psychologically wired to take a greater interest in bad news and there is no end of negative news to read! But not all news is bad and this article describes some of the good news, how it’s made to be negative. For example, despite the record first quarter earnings of US S&P 500 companies and compelling valuations of US stocks, markets declined in May.
“Las Vegas is busy every day, so we know that not everyone is rational.”
“People change when they join crowds. They become more credulous and impulsive, anxiously search for a leader, and react to emotions instead of using their intellect. An individual who becomes involved in a group becomes less capable of thinking for himself.”
Volatility is not Risk
This is one of those, “If you only read one article on the current investment market, read this one” kind of article. John Goltermann is a veteran money manager who hasn’t the public profile of Warren Buffet, but should. He was interviewed and uttered these wisdoms;
“The question should not be, ‘where is the risk’ but ‘where is the value?’ There is tremendous value in certain stocks today. “
“Adverse markets come and go, as do market liquidity and confidence, but it is a universal truth that long-term investments (not speculations) are better made in adverse markets than in euphoric markets because good values are more pervasive. The question is not when and by how much something might go up, but what the risk is and how much you get paid to take it! And everything has risk of some kind, including cash and CDs; one just needs to pick the risks that are best to take.”
Read more: go here
“The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable.”
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