It’s the time of the year when investors who hold mutual funds in taxable accounts begin to brace for a potential nasty surprise.
Investors trade more than they used to. Often these buy and sell decisions are emotional responses to market volatility — an attempt to limit losses in choppy markets. We believe an investor should rarely, if ever, make adjustments to their portfolio based upon an emotional response to the market.
Talk about a rollercoaster. Stock prices in markets around the world fluctuated dramatically for the week ended August 27. On Monday, August 24, the Dow Jones Industrial Average fell 1,089 points–a larger loss than the “Flash Crash” in May 2010–before rallying to close down “just” 588 points.
When listening to news stories about recent volatility, it’s important not to let the reporter’s mission of communicating what happened that day deter from your long-term investment perspective. Often reports center on news that simply does not matter for a properly diversified portfolio.
“The key to successful investing is not predicting the future, but looking at the present with clarity.” This observation by Dr. David Kelly, CFA, Chief Global Strategist, J.P. Morgan Funds, offers particular wisdom today.
I remember reading a Sun Life Financial survey that found that most people tend to turn to their friends and family for financial advice befor
China’s Central Bank recently devalued the yuan by nearly 3% against the U.S. dollar aiming to give Chinese exporters an advantage. And with the yuan now sitting at its lowest level against the dollar in four years, fears have surfaced that China could launch a currency war to boost its sagging exports. The repercussions across world markets have been staggering.
“More.” That’s the response when a young child eats her first piece of birthday cake. It’s also the quintessential response to investment information; however, much as it is with birthday cake, more information is not always better. But that doesn’t stop investors from behaving like gluttons.
A good title grabs our attention. A great title combats our reduced attention spans and propensity for multi-tasking to capture our attention completely and draw us into the piece itself. Such was the case with a recent headline for a recent Vanguard podcast: “Chasing fund performance may be hazardous to your wealth.”
Did you know that in 2010 and 2011 three iconic American companies–Eastman Kodak, Radio Shack, and The New York Times–were removed from the S&P 500 Index. Eastman Kodak was replaced by a cloud computing firm and The New York Times was replaced by Netflix.