If you have had time to read the recent stock market headlines, you no doubt have seen the all-time hit list of financial service industry jargon.
This phenomena takes place every time the stock market trades at new high levels. The stock market correct that follows leads to the familiar banners in the financial media headlines.
“Think long term.” Rebalance.” “Diversify.”
My favorite investment management concept in times of stock market losses is this one. “This is just another buying opportunity.”
All these terms used are intended to be as general as possible. There is no specific stock market risk management advice that a Minnesota stock market investor can actually benefit from.
These financial terms are intended to divert your attention away from actually thinking about taking any action to preserve the last five years of stock market gains.
You have to sell something to take your stock market gains. The financial services industry doesn’t want you to sell. They want you to stay put; regardless of the direction of the stock market.
The financial media never takes the time to address stock market risk management. Individual stock market investors are always supposed to be long-term investors. The fact is that most stock market investors are not long-term investors at all.
The three big investments in a family lifetime are to buy a house, save for college costs, and to retire as soon as possible. Just about the time that one of these expenses is covered, the next one appears on the horizon.
At no time in a family investment timeline does anyone think about losing 40-50% of their stock market investments. Housing prices fell by that much since 2006. The U.S. stock markets fell by that much from 2008-2009.
When you lose that much of your money “thinking long term” takes on a completely different meaning. That kind of long term can last the rest of your life.
There is not investment that you can make that should be long term. Not in today’s economic, political, and stock market cycles.
Right now, you should not be taking any more stock market risk than you are completely comfortable with.
If you are invested in the stock market for the “long term” you can’t be very much concerned about the preservation of that money for a long, long time.
Ric Lager
Lager & Company, Inc.
