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The market has been making a comeback after reaching new highs a few weeks ago and tumbling. Does this mean we can ignore the worry signs and dive in full throttle?
We don’t really know. There could be more upswing left in this market, but we’re think that a more defensive approach is right or us personally. If I miss a spike up in value, it’s okay. I’ll get more of them later, and I’m not convinced the risk of loss at this point is outweighed by the potential for a correction.
This is why a lot of “advisors” advocate buy and hold. They don’t really have to be right or wrong (or at least ever admit it) instead they can just ride the wave. This is getting the managed money people into more and more trouble in recent years.
A lot of investors always forget that hind sight is 20/20 and their fear of missing things drives them to do weird things at moments potentially like this. We could be nearing the peak of the market, and if that is true now is one of those time when many come rushing in after sitting on the sidelines for many years watching the market appreciate.
Instead of dipping their toes in, they decide to go cannon ball.
It’s far too easy to mistake talent with blind luck, and many people get wooed by historical charts and start to think that based on those up and down trends it’ll be a cake walk to get in to buy low and sell high.
We do possess the ability to predict market movements based on the slew of data we have about the financial markets, economy, and stock trends. But they are only predictions. This doesn’t make them bad—in fact lots of times they can be quite good.
We have to understand the limitations that a prediction has. There will always be far too many exogenous variables to any model we use to predict market to have extremely high confidence most of the time.
The market has had a good run for the past several years. Profit taking time is probably in order, and if we miss another quick run up oh well.
Brandon launched the Insurance Pro Blog in July of 2011 as a project to de-mystify the life insurance industry. Brandon was born in Northern New England, and he currently calls VT home. He attended Syracuse University and graduated with a triple major in Economics, Public Administration, and Political Science.