We witnessed a very crazy day for the stock market yesterday. The DOW plunged 800 points only to come roaring back to close down 370 points. It was breathtaking for many of us because we were glued to our TV (and computer screen) as the stock market kept on going down but for some of us, it didn’t really matter because our focus was on other things.
Yesterday, I was extremely busy at work. I was so busy that I didn’t have time to check on Yahoo Finance nor did I have time to talk to my coworkers about the stock market. When I finally sat down and looked at how the market was doing, I saw the headline (DOW plunged 800 points and closed at 370) on the homepage. My net worth probably plunged just like any other 350 point down days, but it didn’t matter as much to me.
I wasn’t emotionally upset this time because I wasn’t “living” the roller coaster. As a result, it hurt my wallet but didn’t hurt my feelings. I felt much better and saved myself from much of the emotions of a down day just by focusing on other parts of my life. I wasn’t thinking about the stock market nor was I worrying about the Cisco (CSCO) shares that I owned.
I was living my life and not being controlled by the stocks I own. I felt good. In this type of market, maybe you should try it too.
How did you spend your day yesterday? Did you even know that the stock market plunged? Can you sleep at night these days? If you aren’t worried at all, reply and show some encouragement to those that couldn’t.
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{ read the comments below or add one }
I agree with how great it feels not to live your life by the ups and downs of the stock market. I’ve been doing that for the past 2 years and it has made a big difference in the quality of my life. In order to do so I set up a hard to access account to further remove the temptation of how much I made or lost. So far it’s working great!
This is much easier to do once you’ve set up a proper savings account with a number appropriate for the inconsistencies in your line of work.
I think this is the wrong approach to investing. You should definitely care about capital preservation since the markets go down MUCH faster than they go up. Common misconception is that the markets grow roughly 7% a year. Not today or in the past 10 years. I believe the astute investor in today’s market, needs to be better informed about the condition of the market and need to understand how they can protect themselves. Whether it’s by placing stop losses, threshold barriers, or even dabbling in options (puts), investors need to care about capital preservation.
Over the long run, economic cycles ebb and flow many times. Emotions can often get the best of us at the wrong times, prompting poor decisions. I wrote about this recently at http://www.seeitmarket.com and how planning, learning, and living our life accordingly can manage through. I like your comments about removing emotion from investing.
Perhaps investment products have now gotten so popular, it’s available to such a broad audience, and the speed and reach of news is so big, that bull and bear markets will start to follow each other much faster and much more volatile than in the last century. This often causes panic reactions, and many people don’t know what to do in such a situation (including me sometimes), so they make hasty decisions, adding to the volatility of the markets.
Cheers.
I am not concerned at all about the gyrations in the market especially downward trends in the market. I use protective puts on all my stocks and know that no matter what happens, my losses are limited. I sleep well at night.
The problem isn’t the stock market itself, it is how the general public percieves its actions (and inaction). Folks will attribute the stranges things to the movement of a stock. Sometimes, there will be a correlation, sometimes not, but such things do not make a good analysis of a security.
Fear-mongering and sensationalism present in our media only fan the flames, and promote this incorrect, and frankly dangerous way of looking at securities.
The Weekly Marketeer may not be as exciting as CNBC, but it does infer relevant information. I’ll take that trade off 🙂
Cheers. The Marketeer.
This is an old thread, but I’m curious to know whether the latest stock market gyrations have changed anyone’s mind about staying on the roller coaster?
The stock markets of today seem more and more out of touch with the real world (real companies, where stock price reflects earnings and value), and more and more geared towards electronic trading and short term speculative dynamics (stocks are merely electronic numbers on a screen). Can a long-term investor really trust this kind of market, which resembles both a roller-coaster and a casino?
@ Funny..Re: “the thousand bucks a month he’s earning there is allowing him to live quite comfortably, in Indian terms. ”
The $1000/month I earn here is allowing me to live quite comfortably also… but I’m debt free also.
Good advice.
I spent the big plunge day(s) figuring out how I’m going to live after I get laid off. The Big Announcement is supposed to be delivered to at least one committee today; remains to be seen whether us peons will hear about it immediately, but I have a couple of companeros on that committee, at least one of whom is likely to leak.
Social Security will pay about a third of what I need to live on (and no, I’m not in debt); try to earn enough to cover the rest, and the SS will be taken away. COBRA will cost NINE TIMES what I’m paying for health insurance now. If I start drawing down my retirement savings in this volatile market, I will lock in losses with every drawdown.
LOL. Maybe I’ll enrich the American taxpayers by going to India and working in a call center. A friend’s son went back to India after finishing his master’s degree here–the thousand bucks a month he’s earning there is allowing him to live quite comfortably, in Indian terms. Why not?
Both Parties have American interest at heart.
Companies reduced cost and 20,000 Mexicans came over to work…The result…The market just dropped 7.5 trillion dollars
I would rather companies grow and hire more people and have the ability to drop 7.5 trillion dollars then have no growth .
This just in, no matter what you think of food prices, they are cheaper now than ever adjusted for inflation. Thank the Mexicans.
IT call centers go to India, companies make more money. The American tax payer gets rich because people who own stocks pay more taxes and they got rich.
People don’t want to talk to people with accents. IT centers are moving back..Thats the free market.
The result? Its prosperity for the majority of Americans. Middle class is feeling pinched because they try and act like the upper class…they have never had it so good.
Stop the madness.
By not voting. Neither party has the Amerian interest at heart. Otherwise one or the other idiot would have called the spade a spade.
We got into this mess because guys with smart lawyers knew how to usurp the system.
Reduce costs, import 20,000 Mexicans.
Reduce IT costs, replace Americans with Indians and then push all the “Cost center jobs” over seas.
The result. This crap.
The usual rebuttal. Well if you don’t like America, leave it.
Bye.
PS – since this has started, I have bought more stocks and upped my 401K contributions. My way of hopefully coming out ahead later on.
I don’t follow my stocks and I don’t worry about them. I made the best investments I could at the time, and a lot of my money is in ‘low risk’ (and low interest) items, like CD’s and treasury bonds. Very conservative.
I don’t feel like I’ve lost anything yet, as I haven’t pulled anything out yet. It will come back sooner or later. I can retire in 6 months or in 6 years – no hurry on my part as long as I am getting this free company health insurance with a 33 hr week 🙂
It’s only money. The worst that could happen is that I lose it all. I’ll still be ok. My house is paid for, I am debt free, and I need under $400/month to survive on a bare bones budget, if I stay healthy.
With that kind of debt free peace of mind, I don’t worry and I don’t stress. I am more concerned with spending quality time with my grandkids and enjoying whatever time I have teaching them the skills they will need to survive financially in this world.
I’m trying to not pay close attention, but it’s hard not to look.
I have a question for you or anyone else who wants to address this: I know of several folks who have decided to stop contributing to their 401k’s and other retirement accounts and start putting that money towards paying down their mortgage. Right now I put $250/paycheck into my retirement fund, and yet my balance is less than it was six months ago. Is it smarter to just keep with the traditional wisdom of investing the same amount no matter how the market is going, or is a diversion into debt reduction a smart move? FYI I’m about 15 miles out from retirement.
@ Richard
What are you talking about?
If your so concern with house prices then start your own bank and require a mandatory 20% down payment and mortgage payments less than 28% of their income. That will ensure people only buy houses they can afford and it will cut many people out of the housing market.
Over time this will make sure that middle class families can afford middle class homes.
At this rate, I will be working forever.
For over the course of the past 30 years, I’ve watched the rich in this country go to the troft of the NYSE — not to gamble with their own money, nor to gamble on human resources — rather to bet the housing community could keep increasing and increasing the costs of housing.
Well, 30 years later there’s nothing left to feed off of.
In 1968, at $2.30 /hour, the home in Mooriestown, NJ cost $38,000.
Had that house staid at that price, I could have purchased one in less than 8 years.
To do the same thing today, I would have to make $30/hour.
That isn’t just inflation, that’s greed and prejudice. The stock needs to drop and we need to have a country that invests in people and not numbers.
I watched my stocks go down.
That comic made me laugh. I’m not sure if it’ the fact that my losses have exceeded the realm of comprehension or that I have some confidence that they will come back eventually, but I haven’t been as upset by the ups and downs as much as I would be by getting a parking ticket for example.
Yeah, me either. What goes up must come down etc. I can tell you this. I was a stock broker in 1987. On black Monday the market was down what 27%. The next day, my smart cleints were buying like crazy. I had my best day ever. They knew it was going to go back up. So will this eventually.