Many people invest without any rhyme or reason. Over the years, on many occasions, I have cautioned people who were buying or selling securities at the wrong time. They wanted to wait until the market had rebounded before investing, and then they panicked and wanted to sell after a sudden decline. So, they bought high, and sold low! And then, they wonder why their portfolio doesn’t match the market performance, or that of the various stocks, mutual funds and exchange-traded funds cited in quarterly or annual reports.
Back on August 22 of this year, the Dow Jones Industrial Average (Dow) was expected to open more than 1,000 points below the prior day’s close. That was due to China’s having devalued its currency, the Renmimbi, by two percent. The market had dropped because many people panicked, even though they had no idea what was going on. On that day, the Dow closed at 16,459.70, or 10.31% below the all-time high, of 18,351.36, three months before, on May 15.
For those investors who stayed the course, and did not panic, the market closed today at 17,838.28—or just 2.8% below May’s all-time high. Investors are always free to trade as they wish; however, they should know what they are doing and why. In many cases, fluctuations have nothing whatsoever to do with specific securities and, as has been witnessed over the past months, the markets may very well rebound.
Once again, I caution everyone not to place too much credence in what they read or hear from the media. In many cases, the writer or speaker may not necessarily know what is going on, and they are certainly not in a position to provide investment advice to strangers—sight unseen. Know what securities are in your portfolio, weed them out when appropriate and, by knowing what you own, you will be less inclined to make the wrong investment moves.