Should You Get Out of the Market in Volatile Times?

Jim Cramer, who is featured on MSNBC's "Mad Money" was recently interviewed on The Today Show. He advised investors to "avoid" the stock market because of its recent ups and downs. Is this wise advice?

Consider the following headlines:

1. “Wave after wave of selling again moved down prices on the Stock Exchange today and billions of dollars were clipped from values.”
2.“The…volume of retail sales went down an estimated 10% last year."

3. “In one hectic week, the paper value of the 1,545 stocks listed on the Big Board plunged by $30 billion—which is more than the GNP of Australia, Sweden, and Ireland.”
4. “The U.S. banking system has been stretched very nearly to the limit.”
5. “The recent crash bears an uncanny resemblance to the crash of 1929.”
6. “Most Americans have lost faith in the stock market.”

What may surprise you about this gloomy list of quotes is that the first one is from 1929, the next is from 1947, then 1962, 1974, 1989, and the last one is from 2002.

I could share many more such headlines, but the point is that market ups and downs happen.  The reason stocks have historically returned more than fixed income over the long-term is precisely because stock holders endure the volatility of the market. Without the volatility (risk) that goes hand-in-hand with stock ownership, the returns associated with stocks would diminish, and so would the attendant wealth. 

Emotions (and sometimes the advice of so-called experts) cause many investors to do the opposite of what will grow their portfolio over the long-term. 

If you live near Plymouth, Wisconsin, I invite you to join us for a complimentary meal and our last investor education class of 2011. We'll be presenting "Myths and Truths: the Story of Investing" on December 15th at both 11:30 AM and 5:30 PM here at Veritas Financial Services, 506 E. Mill St.

If you are out of the area, we still may be able to set up a meeting, or perhaps we can connect on Skype.  Jeremy or I would be glad to talk with you about your investments.  Just give us a call at 920-893-5262.

Margaret Wittkopp
Investment Advisor Representative