Planning your finances and choosing investments can be stressful especially when markets are volatile. But it can be downright scary when like in 2008 they enter free-fall. Many people have decided that the stress (and chance of loss) just isn’t worth it and so they have chosen to stay out of the market altogether. Unfortunately, that means that by the time they finally decide to return to the market it will probably be nearing another top and they will get hit with major losses once again.
This is not just a symptom of the perversity of human nature. It is also the nature of markets because as the market goes up it draws in more people who had been sitting on the sidelines but eventually there are no more people with money on the sidelines so as the last 10% of buyers (the most reluctant) enters the market it begins to top and finally there are no new buyers left and so the market begins crashing. As the old saying goes, “when the bag boy at the supermarket is talking about retiring on his stock market portfolio it is time to get out of the market.”
Today Chris Ciovacco the Chief Investment Officer for Ciovacco Capital Management, LLC (CCM) looks at reducing investment stress. ~Tim McMahon, editor