The financial media has historically encouraged individual Minnesota stock market investors to stubbornly cling to these two main investment management concepts.
First, any extra money that you have should be invested in the stock market immediately. Any time is always a good time to be 100% invested in stocks.
Second, always maintain a buy-and-hold investment management strategy. Through up, down and sideways stock markets and economic cycles, stay the stock market course.
The problem with these two stock market investment management concepts is that neither one has a historically accurate understanding of stock market cycles.
Many of the individual stock market investors that I meet with do not have a clear understanding of stock market history. They don’t realize that a passive stock market investment strategy is destined to fail every few years.
A lack of stock market perspective is especially dangerous for stock market investors over 50 years old. These individual investors are nearing retirement. They don’t have many years left to make up for short term stock market risk management mistakes.
All stock market investors should consider a stock market investment management game plan that preserves their stock market principal. After five plus years of stock market gains, a meaningful stock market correction is a strong possibility.
The current generation of stock market investors has lived through two 50% stock market losses in their investment lifetime. You would think that those two hard stock market risk management lessons would be enough to fix the 100% invested buy-and-hold crowd.
It is not. The lesson has not been learned. Stock market losses are right around the corner. I don’t know when, but the losses are coming. Have a stock market risk management game plan in place before it happens again.
Ric Lager
Lager & Company, Inc.
