Investment Newsletter for the End of August, 2019

The market during August was down somewhat. Despite various news items sending the market up and down, in the end the market was only down in August about 450 points. That number of points is not insignificant, but to keep it in perspective, the month before that the market went up. For July and August combined, the decline was a boring 197 points. In the long run, these monthly fluctuations are meaningless noise and should be interpreted as such

That brings us to the point of this newsletter, which is volatility. The stock market is volatile. Some days it goes up, other days it goes down. Sometimes the reason is understandable and sometimes the reason for the market movements are completely inexplicable. It is a wild ride but, in our opinion, it is a ride that is worth riding. However, if you were to listen to the various talking heads on television you wouldn’t think so. They keep saying things like “is now the right time to be in the stock market?”. The answer in our opinion is always yes. A recession is eventually coming as they always eventually do, but nobody knows when exactly its coming. Anybody who says they know is wrong. Anyone who truly knew when a recession was going to hit would stay quiet about it and make a gargantuan amount of money via the use of put options (derivatives that pay out when securities go down in value).

Timing the market is a fool’s game. More importantly, it is also an unprofitable game. The stock market is one of the most potent wealth creators in the world. To use a cliché turn of phrase “you need to be in it to win it”. Over the long run, the stock market has steadily gone up. It has approximately doubled every 10 years. In order to enjoy that increase you need to be invested. The US stock market could crash tomorrow, but it could also keep going up for another 5 years. Nobody knows. Even if the market crashed tomorrow the stock market would eventually recover. Even after the crash in 2009, the market eventually recovered and soared to higher peaks. If you withdraw your money during a crash you are assuming you know when to get back in. Realistically you are not going to know when to do that.

Don’t be scared off by volatility. It is scary when the market plunges 30% but realize that decline is very temporary. Don’t be distracted by the wildness of roller coaster, remember the roller coaster will eventually end safely at its destination.

We sincerely hope you got value from this newsletter. We appreciate your business and trust.

Dan and Eli

As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.

If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.

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