Hall of Fame baseball player Yogi Berra was affectionately known for his “Yogiisms”: sayings that sounded dumb at first, but had some street smarts behind them. And one of the best known Yogiisms is: “It ain’t over ’til its over!” And that expression certainly has relevance for the topic in question.
The Dow Jones Industrial Average dropped to just over 15,500 in February. It has rebounded lately and on Monday, it closed at 17,074, which represents a recovery of 1,571 points, or 10.13%. But, Yogi’s point was, its unwise to say that the worst is over yet. Its important to keep in mind that there was an even greater market plunge last August. But, after recouping a great deal of that loss, another steep drop on the market roller coaster began again late last year.
Let me suggest, once again, that nothing much has changed! China is still economically and politically inept? The strategic confrontations with China, Iran and Russia still continue. With regard to Global Climate Change, China may be cheating, and the U. S. continues to stick its head in the sand. Even good news, the fact that the U. S. economy is mostly stable, the impact of weak global markets, and the unhealthy strength of the U. S. Dollar, continue to overwhelm it.
Currently, the markets are fueled mostly by emotion, rather than by any rational thought. And within that context, investors seem to always be moved by fear and greed. To an extent, that causes greater volatility, further encouraging some people to buy and sell securities at the wrong time. That means selling after the “correction” (a 10% decline) was well under way, and investing during the later stages of the recovery.
Novice investors, especially those who invest in mutual funds, complain that their retirement accounts don’t match the published returns of the very funds that their money is invested in. For the most part, those returns are lower; because, they trade in and out of the markets—and into and out of cash at random. That’s the problem with trading based on emotion.
Over the years, I have generally suggested that, if an investor feels compelled to make changes, especially if not sure of what they are doing, that they just “tweak” their portfolio—making subtle changes along the way. At the same time, be sure to review your portfolio, from time-to-time, and make sure that you are still comfortable with the securities that you already own.
NOTE: I generally do not try to offer specific advice through this blog; because, I don’t know any visitors’ personal situation, time-horizon, personal preferences, etc. But for a general example, let me suggest the few changes that I have made over the past two years.
I have done very little trading, either this year or in 2015. (perhaps that means that I am quite comfortable with what we are invested in.) When the market was down, I invested part of the cash that had built-up in my wife’s and our grandson’s account. I sold a utility industry mutual fund, which will probably not perform well when interest rates begin to rise, in order to raise cash for the mandatory withdrawals from my Traditional IRA, which I will do this year.