Why a losing stock market can be a win for investors
If the economy remains strong, any fluctuations this year are likely to be short-term, emotional reactions from which the market will bounce back.
If earnings going to grow and the market were to stay flat, that just means the stock market is becoming a better value.
Why? Because when a company is earning more per share but the market is flat, investors are paying the same price for shares that are now worth more.
When the market is down, you can buy on sale
Most retirement investors use a strategy called dollar-cost averaging, even if they don’t realize it: They invest a set amount of money on a regular basis, no matter how the market is performing.
This strategy has benefits, and one of the biggest is that during down markets, your money goes further — you’re able to purchase more shares for the same amount of money.
Even when the market is fairly flat you’re still buying at a decent price, which will help you in the future when the market starts to grow again.
If you have extra cash, a downturn is an opportunity. If you have money on the sidelines (even as little as $500) or room in your budget to increase 401(k) or IRA contributions, you’ll want to look for opportunity in those market pullbacks.
Unless there’s some fundamental change in the market — something has happened — it’s a sentiment change, and that should be a buying opportunity for investors. This is especially true if you’re buying diversified vehicles, like index funds. As the market moves lower, you’re going to be getting some deals.
Take advantage by simply buying more of the index funds you already invest in or, if you’ve done some research and see value in a particular asset class, such as my Watch List on this site, add it to your investment mix.
Retirement investors should set a plan and stick to it, because day-to-day fluctuations matter very little over a long time horizon.
Even when you look at 2008, when we saw a big drop, the people who got hurt were those who got out of the market and then got back in when it recovered. Those who stayed put — and, in some cases, bought more — did well or extremely well.
Fidelity data show that investors who stuck it out between September 2008 and March 2010 saw their account balances go up by close to 22%, despite the market struggles. Those who fled the market at the end of 2008 or beginning of 2009 and stayed out through March 2010 lost an average of close to 7%.
Source: Why a losing stock market can be a win for investors
Want to Get Out of Debt and Build Wealth? Cultivate These 5 Habits
Your financial health is dependent on your ability to minimize your debt and to save money. While that may seem difficult to accomplish in these complicated financial times, it is the proven method to start to get financially ahead.
Once you have developed the ability to save money and minimize your debt, you can start to invest and have your money work for you. It is only then that you can assure yourself a luxurious retirement.
Here are 5 habits that I read about recently that should help you achieve your initial financial goals.
1. The habit of restraint.
Restraint is comprised of patience, dispassion, and self-control. It’s the ability to resist temptations–most notably, impulse buys.
2. The habit of experientialism.
Experientialism is defined as “the philosophical theory that experience is the source of knowledge.” It’s used here as a juxtaposition with its opposite–materialism. If you’ve heard people talk about how they’d rather have experiences than things, well, that’s part of it.
3. The habit of frugality.
Does frugality just mean being cheap? Not exactly. True, producers live beneath their means. (Almost by definition, if you’re debt-free, you’re living below your means.) However, this also incorporates a willingness–even an eagerness–to find deals and negotiate.
4. The habit of strategic thinking.
At its simplest point, this habit is just about thinking before acting–and having a plan. Again, it involves forgoing impulse purchases, and spending money primarily where it creates a real and lasting benefit.
5. The habit of mathematical thinking.
Finally, and probably most important, there’s the habit of thinking about math. I don’t know how it is that so many of us manage to miss this simple point, but our financial system is based on numbers. Educate yourself about basic concepts–starting perhaps with the time value of money and the power of compound interest. And in a world where those who want us to act like consumers often try to hide the calculations behind any deal, they work hard always to find it.
I try to give you some solid advice on math and thinking long term on this site and in my book, The Confident Investor. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.
Source: Want to Get Out of Debt and Build Wealth? Cultivate These 5 Habits | Inc.com