Being Smart with $$ -- Long Term Stock Market Investors Do Well Without Worrying

The stock market has been crazy this year! If you are an avid watcher of the business channels it may be keeping you up at night with worry.  And yet, if you slept through the first 119 days of the year you would be bored to read that the market is barely changed for the year. And you would likely be very pleased to notice that it is up over 10% annualized for the last 3 years and up over 13% annualized for the last 5 years.  As a long-term investor, you could not complain about your 5-year results even if the market dropped 10%-20% this year.  But you have to be a long-term investor to enjoy these kinds of results without dreading short-term volatility.  Investors who worry about short-term results will likely miss the long-term benefit of being in the stock market.  Which kind of investor are you?  If you need a better plan, maybe it’s time to contact an hourly, fee-based financial planner.  I can help.

Larry Pike, CFA
www.clientpriority.com

Being smart with $$ -- Can Fund Managers Avoid Losses in a Falling Market?

"Actively-managed funds are good in a falling market because they can avoid losses.” Is this true and will stock index funds do worse as the stock market tanks? Many believe that fund managers have a crystal ball and know when stocks are going to rise and when they are going to fall. We have seen that historically stock index funds beat the average return of actively-managed funds over the long term because of the lower fees of the index funds. So how about in a falling market? In the last month, the market has been unkind with S&P 500 Index funds down about 4.4%. How about some respected brand-name actively-managed funds? Fidelity Contrafund, T. Rowe Price Blue Chip Growth and American Funds Growth Fund of America have all underperformed their benchmark index funds in this falling market.  For sure, others have done better.  But perhaps fund managers do NOT have crystal balls and aren’t the panacea for falling markets. What to do? Remember that your stock holdings are for your needs a decade or more from now and stop worrying about this week’s performance.
Larry Pike, CFA
www.clientpriority.com