Friday, July 29, 2011

Crisis Du’ Jour

There is much anxiety regarding the fight over the country’s debt ceiling. Both sides seem to be sticking to their guns, while encouraging the other side to compromise. Right now, it looks like a staring contest. The first to blink loses. The market feels the tension: rising despite negativity one day, and coming back down the next.

The biggest question on an investor’s mind might be, “What do we do now, if anything?”

Our answer might sound a little familiar…. Nothing.

No one knows where this crisis might lead. Perhaps no deal is reached, our country defaults and the market takes a dive. Perhaps compromise is made in the 11th hour, causing the market to react positively and soar. Perhaps something else occurs.

There is uncertainty, that’s for certain. But to make investment decisions based on uncertainty is to speculate, and speculating is dangerous. Luckily, we don’t have to. We can have long-term investment success by choosing an allocation that is in line with our risk tolerance and sticking with that allocation through the ups, downs and in-betweens.

There will always be a new crisis to worry about. Some will be quick and painless; others will hurt and require time to heal. Which direction this one goes remains to be seen. How wonderful it would be to predict and reliably time the market. Alas, Mr. Market does not permit this. So in the meantime, the mantra is to ‘stay in your seat’. It is the most prudent way to capture a positive long-term investment experience. Sometimes, a decade worth of gains occur in a short time period. Know that you own thousands and thousands of stocks in good companies. Each day, their values bounce around. But being in the market ensures that you take full advantage of their ultimate rise.

Having said all that, we understand the anxiety that is out there right now. Should you want to talk further in person about this issue, please call.

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