Whenever we see gyrations in the market where the Dow Jones (DJIA), the most widely reference stock market indicator, has been up for a relatively long period (I use relatively loosely) of time and then down by 100 or more points, there is a rush to interpret what is going on. The commentary around these movements can cause individual investors to become emotional, nervous, scared, reactionary, and impulsive….Did I leave anything out?
You may ask what has caused this movement within the markets? Well, Federal Reserve Chair, Ben Bernanke, alluded to the government pulling back on the support it has been providing to improve the economy and restore the housing market. This has been referenced as Quantitative Easing (QE). I talk more about it in my blog post “What does it Mean? Fiscal Cliff, QE.“ Based off his most recent comments, interest rates rose 0.53 percentage points to an average of 4.46% this past week, the largest weekly increase in more than 26 years.
So, when you hear all of this noise, I encourage you to consider the following:
1. Learn the language of finance. It helps with understanding what is really happening and allows you to make better decisions around your investments.
2. Don’t allow the noise to dissuade you from investing. With 401(k)s being the primary way to grow your retirement nest egg, you need to sift through the noise to find opportunities.
3. Investing over the long term has proven to multiply your money. Start early and invest wisely.
4. Money can be an emotional issue, understand your money baggage, face it head on to get to a place where you accept that money and investing are only tools to help you along your journey.
At the end of the day, the Dow Jones and the overall stock market are made-up of companies that you support every day. (Starbucks(SBUX), ExxonMobil(XOM), Whole Foods(WFM), Target(TGT), McDonalds(MCD), and Coach(COH), just to name a few) You purchase products and services from them on a regular basis and for some of you, are employed by them. These companies are what support your livelihood. Your purchasing dollars and those around the world is what keep them surviving, growing and thriving. So as you think about your daily ritual, consider not just being a consumer of products provided by these companies but being an owner, a stockowner. At the core, that is what investing really is.