Day 33: Tweets be damned-Stay Invested


I heard the stock market was down today, Trump tweeted about something, my Geico bill is due next week and The Mother's Little Helper Portfolio was up today because good companies with lots of room to grow do just that, they grow. Pick which piece of news you care about the most.

When you're confused about a repair on your car, what do you do? Ask the mechanic to explain it, right? When you're confused about your taxes, algebra, your teenagers report card, the price of tea in China or just about anything, what do you do? Ask questions, right? When you're confused about stocks and investing, what do you do? Apparently investors think the right answer is to sell. Apparently yesterday the DOW was down more than 223 points at it's low and finished the day down over 122 points. Today was another sell off with the DOW down 107 points. Wow, this looks terrible! Maybe the big institutional investors are right, maybe we should all sell stocks before the whole market blows up. How about we metaphorically spank the impetuous teen and ask some questions. Like why are institutional investors selling? Who knows, maybe they need to cover customer calls who want to exit their positions. Why are those customers of institutions exiting? Who knows maybe they're buying a house, maybe they have a teen heading off to college. There are a million reasons why other people sell their stocks and it's entirely possible that none of them are selling for any fundamental problems with the companies they are invested in. Maybe they're just invested in lousy companies.

The big worry any time the market is down is whether or not this is a long term sustained sell off. What should I do? Acknowledge that this can happen, but you can take action against the feared sustained sell off. How about trying some diversification, something I've often pounded the table about. The easiest and best solution to full diversification, BUY S&P 500 INDEX FUNDS! Owning the whole market protects you against single stock movements. My favorites are Vanguard's VTI and VOO. You can do a Google search to compare the two funds and what you'll find is that they have slightly different allocations but that over long periods of time they perform generally the same. For even better diversification invest in a basket of index funds that give you global exposure to US stocks, European stocks, Emerging market stocks, muni-bonds and natural resources. I'm talking about wealthfront.com and Betterment.com. No matter what Trump Tweets, or who ends up on the supreme court, or who's being grilled by congress, being diversified in the entire global market gives you the upper hand in being well positioned for the next big up or down.

What I think is most important anytime you see a big sell off is to first look at your own investments. How are your companies doing? Is your portfolio up when the market is down? Is your portfolio down, if so is it down as much as the overall market? If the market drops 2% and your portfolio drops 0.25%, you are clearly better allocated for the current conditions. The point is, don't follow the herd, follow your goals.

The portfolio closed the day UP with a gain of +1,480.21 (0.25%), for an overall portfolio gain of +$191.94 (+0.03%) Currently we have 64 companies in the green and 57 in the red.

Stay Invested

Clay Baker

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This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice.
This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.

© 2016 by Clay Baker all rights reserved