These Are the Times that Try Men’s Souls…

August 5th, 2011 by John Anderson – Be the first to comment
Posted in Investing, Market Turmoil


Perhaps the situation is not as dire as they were when Thomas Paine penned those words in 1776.  However, with the U.S. stock market falling for eight of the past nine days and dropping 8% during the past week, these are certainly times which test our tolerance to look past the short term. After yesterday’s 5% drop in the S&P 500, the index is now down for the year, and phrases such as “market turmoil” and “global sell-off” are dominating the media outlets.  It is the skilled investor who can stick to her long-term plan in the face of short-term pain.

As a fellow investor, I understand the uncertainty you’re feeling.  We certainly don’t like to see our portfolios fall. We here at Cypress Wealth are paying close attention to the events that are causing a stock market sell-off unseen since the financial crisis of 2008.

Yet our advice to you is: take a deep breath, stay calm, and keep your emotions in check. Restraint can be difficult, but successful investing requires it. In times like these it is important to keep our long-term focus and remember that we are investors and not speculators.  In my opinion, the recent and dramatic sell off is driven more by fear than any real data.  While none of us have a crystal ball and no one can predict the immediate future, there are plenty of reasons to look past the current conditions.  As our last earnings season showed us, most U.S. companies are sitting on solid books with large piles of cash.  The economy while not on fire, is showing slow and signs of growth and will muddle through over the next several months.

As long-term investors, we’re owners of businesses and markets that generate real earnings — not just some list of tickers that we move in and out of, as do so many Wall Street traders. We invest in the best companies and solid asset classes which presents the best opportunities to create lasting wealth without racking up excessive trading costs (and stress). We’re not market timers, nor do we know where stocks will go in the next month or quarter. But we know that throughout history, stocks have been and remain one of the best ways to create lasting wealth for you and your family.

Looking back for context, we know that after falling 22% during 2002, the S&P 500 rallied 28% in 2003. In 2008, the market dropped a whopping 37%, only to gain 26% in 2009 and 15% in 2010. History is on the side of the investor who remembers that investing is a multiyear endeavor served well by patience and global diversification.

Finally, stay calm and remember your long-term objectives and stick with your plan.  Loosing focus only costs wealth in the long-run.

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The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly. Investing involves risk including loss of principal.