We’ve had 401ks and IRAs for over 30 years now. These investment plans shifted the burden of planning for your comfortable retirement from companies with pension plans to you overnight. Your comfortable retirement completely rides on your shoulders. You would think, given the unconditional necessity that we be successful with our investments, we would put more time and effort into learning how to ensure a satisfying future. Instead, folks have no clue, put no effort into learning, and manage by the seat of the pants. They base their actions on false assumptions: that markets will continue to go up and that they can buy and sell their way to prosperity. They couldn’t be more wrong. It’s possible we could all be successful if we took the task more seriously and planned soundly.
The stock market goes up and down. This is no secret and it’s no surprise. It is the very nature of any market…stocks, bonds, commodities, currency, business cycles, you name it. No one knows when it goes up or down, no one. And yet people, with no plan or knowledge, think they can guess when it goes up or down and base their future financial success on their guesses? Does that max out the ridiculous meter for you as much as it does for me? Folks use this guess work every day thinking that’s how the investment game is played. It’s not a game, it’s the quality of your life in the future and that requires serious plan.
No one will ever guess correctly. We aren’t wired to guess correctly.
We don’t think to invest in markets until they go up. Even then, we don’t invest until stocks have gone up enough to ensure our psyches that it is “safe” to dive in. Positive talk on the street = time to invest. By then it’s too late; the upward cycle is coming to an end. When we feel greedy or we feel we are missing an opportunity that everyone else has jumped on already, we take the plunge. Want to buy gold any one? Here’s a tip to follow, when the people who know nothing about investments or investing start to talk up an investment, RUN AWAY from the investment. The great unwashed masses are always the last to jump on an investment before it pops. By the time it pops, the knowledgeable investors have harvested their profits and left the masses holding the bag. Then the masses blame the market and prosperous people instead of looking in a mirror.
We dump out of the market when things go down. Even then, we don’t dump until it’s gone waaaayyyy down because we aren’t sure at first if it’s just a blip and may go back up. We invested at a high point and we’ve lost value so we are emotionally attached to the investment until we regain some of our value. When value isn’t regained but goes down some more, eventually we can’t take it anymore so we sell.
We invest high and sell low, just the opposite of what we are suppose to do. This rips the guts out of our returns. Then we blame the market. To succeed, you must have a plan that forces you to buy low and stops mindless trading.
http://moaablogs.org/financial/2010/11/%e2%80%9cthe-stock-market%e2%80%99s-not-an-investment-it%e2%80%99s-gambling-%e2%80%9d/
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