Investment Advisor - Stock Market Roller Coaster

2011-08-09 - John D. Buerger, CFP® - The Wealth Coach checking in and I thought I would share some ideas about what's going on in the stock market. It has been a pretty wild ride. Yesterday, August 8th, 2011 the Dow Jones Industrials average lost about 5 1/2 percent, and the S&P 500 lost 6 1/2 percent. All told over the last couple of weeks, the markets are down anywhere from 18 and 24 percent - that's a lot of money to lose.

As a CERTIFIED FINANCIAL PLANNER™ professional, I do help people manage their investments. It's not everything we do in the financial planning world. In fact, managing cash flow is a much better way to build wealth often than through your investments. However, as we've seen over the last couple of weeks, you can lose and awful lot of money really quickly in the stock market so it is important to pay attention to it.

What's been going on? Mostly what we're seeing is that the stock market IS exactly what I've been saying it is all along - a big, mean, ugly and harry roller coaster. I know it's put out there as some kind of kiddie ride with some kind of guaranteed rate of return.

It's not guaranteed at all. In fact over the last five years you'd be losing money if you had been invested in the stock market. If you started investing in August of 2006, as of yesterday's close you'd be down 11 1/2 percent. That's if you could avoid transactions costs and advisor fees which are next to impossible to avoid. That's quite a loss for five years of working really hard at it.

So yes, the Stock Market Roller Coaster is really just that - the ugliest, harriest, meanest, most viscious roller coaster ride you could ever imagine ... and that's what I wanted to talk to you about today.

If you're feeling bad, really bad, gut-wrenching bad about your experiences the past couple of weeks in the stock market - and with losses of 18 to 24 percent, that would seem perfectly reasonable - If you're feeling really bad right now, maybe the Stock Market Roller Coaster isn't the best ride for you and your hard earned money. Maybe you need a different strategy.

Understand that investing is all about taking money, putting it at risk and hoping to get a return for that. This is what stock market risk looks like. You're not going to hear this from most investment advisors or those in the financial media because frankly, there IS a lot of money to be made in the investment world, just not (as I've said many times before) for people on your side of the desk. It is for folks who make money on your transactions. You may be losing money in the market but they're still making money.

So if you feel this gut-wrenching motion, that's OK. Understand it and try to understand how much risk is truly appropriate for you and then find the strategy that gets you the greatest amount of return for that level of risk that you are willing to take.

Hopefully you'll have someone helping you along who is honest about how much risk that particular investment has.

Category:

Education

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• financial planner
• investment advisor
• stock market
• stock market roller coaster
• risk