The market this month is up about 1,000 points. Most of you made a lot of money this month. If you had sold out of your positions when the stock market had one of its many volatility swings due to various domestic and foreign news items, you would have missed out on that gain. In today’s newsletter, we are going to talk about discipline.
One thing that must be understood about the stock market is that in the long run, the vast majority of news items do not matter. The market swings back and forth with the news cycle, people’s fears and greed, and often just random noise. Unless it permanently affects a country’s economy or company’s profitability, the effect will eventually wash out. For example, when Brexit was announced, the stock market temporarily took a steep dive, but why? While Brexit would affect things in the short term, companies will adapt just fine in the long run. There are companies that survive in times of war. Human ingenuity is very resilient. A couple days after Brexit was announced, the market realized it had overreacted and the market surged back up.
If you had the discipline to hold on to your positions when things are bad, you would have profited. Discipline in the context of financial planning means you are able to stick to a plan. It might mean buying when the market is bad, which is very scary, but it is the ability to stick to what you had agreed to. Often the biggest enemy for an investor is themselves as their fear can overwhelm their better judgement. The market has many swings. However, in the long run it trends up. Our advice at Dollinger Management is to disregard the financial news when it comes to your portfolio. Create a plan you are able to stick to and stick to it.
If you have any questions about how you are invested or would like to talk about your plan, please call at any time. We sincerely hope you got value from this newsletter. We appreciate your business and trust. We hope you all had a good Thanksgiving.
On a separate topic. It looks like the tax preparation software will be available in our office early this filing season. There were almost no changes in the tax rules this time. Please call with tax questions or if you wish to do some tax planning. Taxes are a very important part of your financial plan.
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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