Good News!
Watching the Dow Jones average approach a higher level, I smiled with peace within myself.
As I have instructed all my students, over the past 35 years, the markets go up and down daily, but, the long-term trend is always up. In fact, the stock market looks like a yo-yo going up and down in the hands of a man walking up steps. Hopefully, you learned from my teachings, and your own research, that equities will always beat out every other asset class over time. You, personally, can remember the Dow hitting 11,700+ in 2000. Then, the tech-wreck and 9/11 caused it to drop to 7,400. If you sold out at the bottom, you probably lost money. If you held on…then, no money was lost. You have experienced and learned a valuable lesson. Buy and hold will always win out (unless there is a worldwide thermo nuclear holocaust – if so, the world is over and who cares). Over these past years, the “drive-by media” simply dumps bad news on you. Even with “all” the bad news in the world, the markets keep going up. (You know, it has been the same bad news reported for the past 200 years.
You know, it is funny, the Investment Company Institute, that tracks individual investor behavior, noted the following: In 1982, when the Dow was at 762, money was flowing out of the stock market. In 1987, at 2,100-2,200, money was flowing in. When the Dow dropped to 1,700, money flowed out. In 1997-2000 money poured into the market during the tech bubble on the way up to 11,700. When the bubble burst and the Dow dropped to 7,400, guess what, money poured out.
From 2004-2007, money again poured into the market as it rose. In the 2008 stock market drop, trillions moved out of the market and into cash. March 9, 2009, the market hit the low point. One year later, the market was up over 65%. Now that the market is back to a level prior to the drop, money is coming back in…just about the time when a mild correction will take place. So, looking back at the recent drop, people poured money in at the top, took a 40-60% drop, sold out at a loss and, now after a huge gain, these same people are investing again near a top. I thought the rule was “buy low, sell high.” The masses are all doing the opposite of buying high and selling low.
Watch…once the “drive by media” notes a new record on the Dow, money will pour in. Enjoy the ride, stay on the course.