I wrote this article on August 29, 2011 on my Golden Valley Patch Blog.
On Aug. 15, 2011, Time Moneyland carried an article titled “Why It Pays to Ignore the Financial News.”
The author of the article, J.D. Roth, cites a Harvard University study of investment habits found that “investors who consumed no financial news earned better investment returns than investors who were fed a constant stream of investment news.”
If you are interested in more information on the study, read this book from Gary Belsky and Tom Gilovich about “Why Smart People Make Big Money Mistakes and How to Correct Them.”
I found one of the conclusions of the study the most interesting. That is, “investors who learned nothing about their stocks earned more than twice as much as those whose trades were influenced by the media.”
So, “smart” investors made twice as much money as “uninformed” investors. Making twice as much money investing in anything, at any time, is a lot of money!
Taking the emotions out of managing your investments will almost certainly improve your long-term investment results. That however, is much easier said than done for most Minnesota investors.
With the stock market as volatile now as any time in recent history, take a step back and ask yourself the most basic of all stock market investment management questions. Ask yourself, “Are more people buying stocks now or are more people selling stocks now?”
If the stock market is rising, it is because more investors are buying stocks than selling stocks. In a rising stock market, your 401(k) account balance will likely rise.
If more investors are selling stocks instead of buying stocks, stock prices and your 401(k) account balance will likely fall in value.
It does not get much more complicated than that. Always know what kind of stock market environment you are invested in.
Protecting and growing your 401(k) account can be helped with a little common sense investment management. Everything needed to manage stock market risk all begins with the basic law of economics: supply-and-demand.
Ric Lager
Lager & Company, Inc.
