The Minnesota summer is now in full swing. A ride on a roller coaster is a big part of the summer experience for many people. I want to remind you that a ride on the stock market roller coaster is not nearly as fun.
Stock markets go up every few years to record high price levels. Soon after, the price levels fall, sometimes dramatically. It looks like the summer of 2013 is going to repeat that stock market pattern once again.
The buy-and-hold investment management style that most individual investors employ is especially prone to give back a great deal of stock market gains. I never fault the individual Minnesota stock market investors that I meet who follow this classic investment management strategy.
The facts are that most investment professionals practice the same buy-and-hope investment management strategy. Making money when the stock market goes up, and then giving most of the gains back when the stock market goes down, is all that these investment professionals know how to do.
Right now, you have to be very aware of the level of stock market risk that you are taking. There are clearly more sellers than buyers of U.S. stocks now. I am not predicting a great stock market fall. Instead, I am just reminding all stock market investors that more supply than demand for any good or service means that prices will drop.
Now is the time to learn how to manage a climate of high stock market risk. Don’t let the financial news channels or your favorite internet financial web site lull you to sleep.
There is absolutely no reason for any stock market investor to be surprised by the all-of-a sudden weak stock market. It has happened before and will happen again in your investment lifetime.
The key is to learn how to make the necessary changes in your risk level when the stock market environment changes. It is not that hard. All it takes is the time to learn a new investment management habit.
Ric Lager
Lager & Company, Inc.
