Timing the Market: Headlines and Heresy

While I am convinced that some (read: very few) people in the world have the ability to time the market, you and I are not them. That is not meant to be an insult to you, but if you could successfully time the market then you certainly wouldn’t be reading this article.

The Market Moves Mysteriously

Wednesday the U.S. stock market had one of the best days in recent memory. The returns of the major indexes were as follows:

• Nasdaq - 3.12%
• Dow - 2.52%
• S&P 500 - 2.51%

Why do I tell you this today?

You see, yesterday was a great day to be invested in the stock market. However, you would not have known it if you had been listening to the so called “experts”.

Here are some of the morning headlines from major investment news sources:
(Heresy is a dislocation of some complete and self-supporting system of belief)

Fed Worried About Rising Inflation at June Meeting - CNBC
Unemployment rise at 16-year high - Financial Times
Dollar Declines Against Yen as US Banks May Report Losses - Bloomberg
Fed Chief Gives Gloomier Outlook On US Economy - CNBC
Inflation Data Tame Stock Futures - Investors Business Daily
Recession Under Way? - Morningstar
Seeing Bad Loans, Investors Flee From Bank Shares - New York Times
Is Your Cash Safe at the Bank? - TheStreet.com

What Does This Mean?

No, I am not saying that just because I said to stay the course and keep investing in equities yesterday that I am any better at predicting the future than the authors mentioned above. Heck, for all I know the market could lose yesterday’s gains and then some in today’s session!

What I do know, however, is that being a long-term investor is a better option for me than being a short-term trader.

What I am also suggesting is that we have to develop our own investment plans that work for us and stick with the plan. We can’t be bothered by the hype in raging bull markets, nor the doom and gloom sentiment in bear markets. I know as well as you that what I propose is easier said than done, but it is for our own financial well being that we develop an investment plan that makes sense to us and stick to it. Once we start straying from what we know, we are more likely to get burned.

Remember, the above authors get paid to sell papers not to invest your money! Those headlines make them money, but you don’t have to let them lose your money.

Just think about it.