As the miles add up for stocks’ wild ride this year, long-term investors are far better off than those who chase these explosive rallies, writes MoneyShow.com personal finance expert Terry Savage.
Before you get all excited about the wild swings in the stock market, here’s something to consider: We are within 150 points of where the Dow started the year!
But between January 1 and October 10, according to Dow Jones Indexes, the market has traveled 20,301.98 points, if you add up the distance between each day’s close. No wonder you’re worn out watching the market action.
It was just a week ago, on October 3, that the Dow closed at 10,655. An early sell-off the following day had analysts saying the decline had reached into bear-market territory, posting an intra-day drop of 20% from the highs of the year. But the market rebounded to close with a gain that day.
Ever since, the bears have been licking their wounds. The market has gained 7.3% from that day’s closing loss.
Monday’s 330-point rally in the Dow, to close at 11,433.18, is a great demonstration of how futile—and even dangerous—it is to base your investment strategy on one day’s headlines, whether on the upside or on the downside.
There’s been no substantial change in the market-moving news. Yes, there is hope that Europe will get its act together and limit the damage caused by Greece. But those hopes could easily be dashed. The latest US economic reports, especially those related to jobs, continue to show anemic growth—but at least not negative numbers.
Quarterly earnings reports will be revealed this week, likely showing the same number of surprises to the upside as to the downside.
In short, the current market is ruled by emotion. And it’s the emotions that are volatile, not the economic reports. The Dow Jones Industrial Average is within 150 points of where it started this year. And that difference could be made up tomorrow!
You can save a lot of wear and tear on your emotions and your wallet by keeping your eye on your long-term goals. And that’s The Savage Truth.
