Tuesday, November 16, 2004

Hoping to Retire Soon?

This post is for my Grandma and to whoever else is hoping that the stock market is going to go back to the good 'ol days of the 90's. This hope is well grounded...you want to retire at some point in your life. The only problem is that no matter how much hope you have, it is not going to be enough to push the markets higher. You could have 10 lbs of hope or 1,000,000 lbs of hope (is hope measureable???), the only way you could influence the markets through your feelings is if you had $100,000,000,000,000 to back them up and even then it would be difficult in the long-run.

The markets go up and yes, the markets go down. I'm not saying that all stocks go down at the same time. There will be some stocks that increase while the market, in general, falls. But, the markets can fall just as easily as they can rise. So, why do we have to believe that the market must go up? Well, emotion gets in the way. The hardest thing for an investor to do is to get rid of that emotional impulse. There are countless books written on this subject alone. There is an entire psychological profession dedicated to only investors and traders. So, I will not get into it here with the little space I have. The information is available, you just have to look.

The markets are not going to rise substantially any time soon...sorry Grandma. This does not mean you can't make money. You have to take what the market gives you and react. Investing is not any different then any other action reaction that occurs in the world. A car is speeding at you at 100mph, what do you do? You get the heck out of the way. The NASDAQ goes up 20 years in a row and climbs from 250 in 1984 to over 5000 in 2000 (largest gain in the history of the markets), what do you do? You get the heck out of the way.

As I've said before, you can still make money in a generally falling market. There are obvious trends being established right now. You know that interest rates are going to rise in the future. What should you do? Purchasing a Rising Rates Fund doesn't seem all that unwise.

I am trying to warn the "hopers" right now that the markets are not going to rise, in fact I believe they are going to fall. So, be prepared for it. Even if you don't believe me, you should be prepared for the chance.

The key here is education. Do you think that retirement is important? If your answer is "yes", then you better start learning now. I got lucky and for some reason this "stock market stuff" excites me so I am learning about it every day and have been every day since I was 16. There are plenty of resources available to you...keep checking my sidebar for links to educational sites to peruse through.

A good start would be to continue to read this blog and the other blogs I have on my sidebar...especially, SecurityTraders.com. Another good read that I look forward to every week is the free newsletter of John Mauldin. You can get the most current newsletter here along with the older ones.

I am done with the lecure now...sorry.

Best Regards,

The Soothsayer of Omaha


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