You know what I’m talking about, the elections. No matter how you feel about your local, state and federal elections, the fact of the matter is, they finally all are over for this year. I’m pretty sure I just heard the entire US cheer but any polls you read would defiantly show the opposite. I know, it was a bad joke but I’m not even going to delve into politics with this post. What I will delve into is something I’ve been talking about since I started this blog and it’s something I will be talking about for a very long time.
The markets gave us a lesson in patience yesterday. The lesson was not to overreact to the unexpected or what you you perceive to be a disaster. This will almost always turn out to be a bad idea in hindsight. So what exactly happened yesterday?
As soon as early numbers started to pour in, a Trump presidency start to seem more and more likely. How did the markets react to this news? The Dow fell over 700 points. Where did the markets finally end up? They were up 256 points. A near 1,000 point swing in only 24 hours.
It always amazes me how volatile human emotions are and how we let them effect our financial decisions. Many did the same thing at the beginning of the last recession and then waited until the last year or two to put their money back in the markets. By then it was too late. The losses were earned and the potential gains were lost. Yes the recession was a disaster but following the above plan led to losses you didn’t have to sustain over the long term.
Maybe a better example is Brexit. The markets crashed over the next few days to then rebound in an astounding fashion. This happened because everyone realized they had no idea what Brexit really meant right then and there.
Remember, when it comes to your finances you can’t make snap decisions. You have to remove yourself from the moment and take a look at the bigger picture. I understand his is incredibly hard to do and no one is perfect at it. This is the biggest reason why I invest mostly in passively managed funds. No one knows what the next four years will look like. It could be a tremendous success or an epic failure. So don’t make rash decisions right now.