Why You Should Ignore the Stock Market
There is already speculation that this past Monday will mark the bottom of the stock market in our current recession. What do I think? I don’t care. And, if you want to consider yourself a savvy investor, neither should you. In fact, when asked recently where he thinks the stock market will go over the next few years, investor demigod Warren Buffet retorted that he didn’t know, and that it doesn’t matter.
And it’s true: If you are in your twenties or thirties, where the stock market is going in the next month, the next year, or even the next ten years, doesn’t matter. When the stock market has a really awful day; ignore it. When it has a really great day; ignore it. Just keep your head down, invest in yourself and increase your income, spend less than you earn, and invest the difference. Do that and you will make a lot of money.
It’s why you don’t see me write an awful lot about investing strategy here on Money Under 30. There simply isn’t much to it. Most of my investments are in exchange-traded index funds that track the overall market. I contribute to them on a regular basis and, for the most part, forget about them.
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Anybody trying to guess where the market is going by actively trading is most likely wasting money on fees and loads (and thereby reducing their returns). In fact, The Motley Fool just wrote about a study that showed, on average, male investors trade more often than female investors, but earn lower returns!
So there you have it: invest and forget it. Ignore the stock market, unless you’re not in it at all. In that case, start finding money to contribute to your retirement accounts. If you contribute the maximum allowed to your 401(k) and/or a Roth IRA, open a regular brokerage account. If you don’t yet have an IRA—get one! E*TRADE offers no-fees, no minimums and 100 commission-free trades%dagger;.
What do you think? Do you invest and forget about the market? Or you do disagree and think that even young people should pay attention to short-term market fluctuations and adjust investments accordingly?
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- All About Exchange-Traded Funds (ETFs)
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In theory it should bother no normal investor. You addressed us young’ns but older people shouldn’t care as much either. Someone in their 40s still has time for a recovery before retirement, and people in their 50s and beyond should have a good amount of their investments in bonds by now and avoided much of this mess.
I’m with you David, we shouldn’t pay attention to the market’s movements.
I agree completely. Anyone trying to make a quick buck in the stock market is playing with fire. If you are a long term investor, there is nothing to worry about. I would add however, that with stocks so low, I am snapping up some bargains (mainly via increasing 401K and ROTH IRA contributions and buying mutual funds) but I plan on holding them for the long haul.
Investing in index funds fails to hold individual companies accountable, and only enables and facilitates executive-level accounting fraud and other non-positive behaviors. In these same 20s and 30s (hitting 30 here) you should educate yourself about solid companies and their equally solid management, buy for value, and invest for the long term.