Recently I have heard from many people about their concerns about the stock market. They are wondering about oil prices, the election, the economy, interest rates, etc. The concern is always about recent news they’ve heard, and how it can affect their investments. 100% of the time the conversation is always about “Should I get out now before it gets worse”. No one has said to me “Hmm, bank stocks are crashing, maybe it’s time to pile in”.
Here is the problem. If you ask someone if the market, or bank stocks, oil stocks, or whatever will be higher at some point over the next 5 years, almost inevitably they will say yes. But the problem is we are people. We do no live our lives in 5 year increments. We live our lives day to day. So if someone thinks about their investments twice a week, they get to worry 100 times a year, or 500 times in 5 years. That’s a lot of opportunities to worry about all the things that can go wrong.
To the extent that we can, we need to push out that time frame. Economic cycles are long. They take years to unfold, not in days or hours, no matter what the press may say. Try to think of it in terms of a long term purchase like a car. You don’t buy a car, then worry about the next car you are going to buy the next day. Or like going to college. In day 1 in English 101, our first job interview is not the main thing on our minds. Investing, like college or car ownership, is a process. There will be ups and downs (i.e. bad grades and transmission repairs). But it’s the long term goal that matters, not the day to day. Ditto for your investments.