This past year has been a great one for stocks. The market just kept going up, up, up. It was incredibly steady and delightfully uneventful. Yet out of nowhere, the market dropped, and some of us panicked. Just look at this chart of the S&P 500 over the past year. The S&P had gone over a year without a 3% correction, and between January 26 and February 5, the S&P 500 fell over 7%.
It's easy to get caught up in all the hype when there is sudden volatility, but these articles should put you back at ease. Enjoy.
The Stock Market Didn't Get Tested - You Did by Jason Zweig
The opening line says it all... Stop trying to make sense of the stock market.
When the market goes up, we tend to accept it as the way it ought to be. When stocks fall, we want to know why, why, WHY???
In essence, "searches for a rational explanation of Monday’s madness are futile." And most importantly, that's okay.
The hurt we feel when losing money outweighs the joy we feel from making it. This is normal, and our perceptions can mislead us. It's a personality flaw that seems to be shared by all of humanity.
When it comes to stocks, it helps to keep this tendency in mind and stick to your plan.
Just Keep Buying by Nick Maggiulli
Speaking of plans, dollar-cost-averaging just works.
Nick Maggiulli uses beautiful analysis to show the benefits of adding to your portfolio on a regular basis (regardless of what the stock market is doing in the short-term) and holding for the long-term.
"Ironically, the best time to buy is also the time when you are most likely to lose the faith and sell."
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