Posted in: S&P 500 |
The stock market fell sharply earlier this month, following disappointing performances all spring. Lower-than-expected job growth and concerns about Hungary’s economy led to the Dow Jones industrial average falling 3.2% last week, its lowest point since February.
In times of extreme market volatility, smaller individual investors should realize how much of their investments are at risk.
After a year of better returns, compared to 2007 through 2008, bad brokers will try to convince clients that now is a safer time to invest in riskier securities. Of course, this couldn’t be farther from the truth.
For starters, the American economy is being influenced by many factors out of anyone’s control. When job growth failed to meet a benchmark set by economists several months ago, investor economy was affected. When the EU’s problems were rumored to have spread to Hungary-a country with a population of only 10 million-the global economy also affected the Dow Jones.
“Why should the market care just about small little Hungary?” Ryan Larson, head trader at RBC Global Asset Management told the Los Angeles Times. “It speaks to the fear of contagion spreading across multiple banks and countries in that area.”
If you are not a trading expert, this should teach you how fragile investors confidence can be. So any broker who claims he or she can predict market conditions in one year, one month or even one day, is being disingenuous.
Also, as mentioned on this blog, many individual investors even missed out on the bulk of the gains from last year, even though the Standard & Poor’s 500-stock index rose more than 24 percent.
Making money in a volatile market involves making shrewd investments with near-impeccable timing. As the New York Times reported last year, those who began investing in April 2009-as opposed to March or later-would have missed out on nearly half of last year’s returns.
During last year’s market upturn, corporate investors vastly outperformed individuals. The JPMorgan Multicap Fund, for example, saw returns of 28.2 percent in 2009 while average investors earned just 8.1 percent from this fund during the same period.
Even if your portfolio is currently performing well, now is still the time to be exercising patience with your investments, and caution with your stockbroker. Whether the market is performing well or poorly, check your account statements thoroughly, and always be on the lookout for signs of fraud.
