A Little Turbulence - Old Peak Finance

A Little Turbulence

October 30, 2014

2014_turbulence

A Little Turbulence

October 30, 2014

Given current market volatility, I thought the cartoon above was worth sharing. It’s by Michael Ramirez, a 2-time Pulitzer Prize winner, and was originally published in 2008, when the markets seemed to be in a free-fall.

There are several lessons here.

First, there are two major industries that make money by inducing fear: the media and Wall Street. The media will sell more ads. Wall Street will persuade you to buy their “product of the day”. It typically protects you, too late, from what just happened, and it almost always carries high fees. Worst of all, you sell low.

Second, short-term volatility says nothing about the long-term result. Many flights have turbulence; almost none crash. The statistics in investing are also compelling. Over the last 85 calendar years, the US market experienced 25 losing years — plenty of volatility. But there were only four 10-year losing periods, and no 15-year losing periods. Historically, the odds have heavily favored the patient investor. Maybe this time will be different. But I wouldn’t bet on it.

Third, you’ll probably be happier if you tune out the volatility. Take a look at the passenger at the bottom left. He seems a lot les likely to jump out the emergency exit than those behind him. Yes, monitor your investments periodically. Yes, ask tough questions about whether they fit your long-term plan. But tune out the short-term bumps. In the long run, they’re just not important.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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