Emotion and Your Investments – Where is the Market Going?   

Emotion and Your Investments – Where is the Market Going?   

 We all know emotion and investing don’t mix. Ya right, good luck with that one. I can’t imagine a more emotional year than this one and anyone who tells you it’s easy to separate the two has been quarantined a little too long.

When we react emotionally to any situation, rational goes out the window. The problem is that when emotion affects our investment decisions, years of planning can get thrown out the window.

As an example of how emotional investing can destroy a solid retirement master plan just look back to March 6 when oil prices went below zero for the current delivery and how everyone was blown away that oil prices could drop. Seriously?  You don’t have to be Einstein to realize that if you completely shut down the economy and no oil is being used, prices are probably going down?

Fast forward to today. The market is selling off because of the jump in new COVID cases. Really, that’s a surprise? The country is finally opening up…what did you think was going to happen? The new cases are not off the charts, but of course they are rising. Are we supposed to wait until the last person is done being sick? We allow people to drive even though there are over 500,000 automobile fatalities every year. We can’t stay holed up in our basement eating spam indefinitely.

What is important to focus on is how and where the recovery is going to come from. The good thing is we know!

The HOW is money. Lots and lot’s of money. There has never been a problem that money couldn’t fix.

The WHERE is from the Federal Reserve and the government through monetary policy and fiscal stimulus.

There would be a much bigger concern if we had uncertainty surrounding them…but we don’t. They gave us their secret playbook. We have the plan directly from the people who print the money.

In short, the plan goes like this: Print money out the wazoo until we run out of paper to print it on or electricity to run the machines…. whichever comes first. Actually, a fun fact: United States currency paper is composed of 75 percent cotton and 25 percent linen.

We know this because they have told us point blank that’s what they are going to do. Zero interest rates at least until 2023. This is a long-term positive risk asset.

The biggest “uncertainty” that I have known in my 30 plus years of doing this has always been what the Fed is thinking and planning on doing. We have never known before…until now.

Sure there will be ups and downs, mostly emotional reactions which will then directly affect financial markets in the short term. Investing is going to be very difficult going forward unless you have a very good understanding on which asset classes to focus on (There are six: stocks, bonds, real estate, commodities, international and cash) and which sectors to emphasize in your portfolio. It will be challenging, but these are the things we do for our clients every day.

The good news is that the long term doesn’t get much more solid than this.

Call for your free no-obligation consultation today.

 

Cheers -Keith

916-925-8900

“Invest for need, not for greed!”

Smart Money Newsletter

Written By: Keith Springer

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