STAR WARS ADVICE: “STAY ON TARGET”
Some weeks can be brutal for world stock markets. Recently, the Chinese stock market dropped over 7% on both a Monday and a Thursday. It probably would have fallen more but these drops triggered some sort of market unplug that stopped trading. The Chinese government then forces market participants to buy shares or does not allow them to sell shares hoping to stabilize things, for a while at least.
In North America, it’s not unheard of for the New York and Toronto Stock Indexes to drop almost 6% in a week.
These kinds of weeks are not that uncommon. The best advice in these situations is to ignore what’s happening and stay on target with your strategy to save 6-10% of your income and invest it three ways; Canadian stock index funds, international stock index funds, and Canadian bonds.
Stop watching BNN (Business News Network) or CNBC or Fox Business and go on with your life. These television stations are all about entertaining and creating drama. They are always trying to convince you to take some action, or invest in some new product or person.
Remember, television stations are looking for audience, primarily to sell advertising. To keep their audience, they need to sell the false dream that anyone can beat the market if they watch and learn from the self proclaimed “experts” who know exactly what stocks to buy to make a killing.
Try this experiment next time you are tempted to follow the advice of one of these superstar investors that you see on BNN. Go online and try to find out how the superstar’s fund has performed over the past year, 3 years, 5 years, etc.
Chances are you won’t be able to find that information. More and more of these fund people are hiding their past performance because it is so rare to beat the market. Or, they may boast about beating the market in the past year, but do not mention their performance over the past 5 or 10 years.
If you find yourself constantly questioning our simple investing strategy because of what you see on BNN, then resolve to stop watching. It’s hard to not do something, especially when it appears that everyone else is doing it. That’s how we get stock market bubbles and crashes.