You’ve heard this before: We are on the brink of major change for the United States of America. We have elected the first African-American president, and, significantly, put into power a party and a platform suggesting that the old ways of doing things are just that: old and outmoded.
In a few months the new regime takes over, but you can be sure that from this day forward, new ideas and new people will be in the forefront of the planning and the transition. We’re going to be hearing a lot about the economic policies and plans of the new administration, as everyone scurries to at least look like they’re solving the problems of the previous administration. After all, when you build a political platform on change (for the better), you’d better make sure you’re not sitting still. There are people watching your every move to see what you will put into practice.
Now, as an investor, and as someone who perhaps has had a downturn in your fortunes in the stock market, you’re going to be watching the new administration pretty closely. You’re going to want to know when it’s safe to start buying stocks again, which means your confidence is going to have to come back in leaps and bounds.
After the Great Depression of the late 1920s and early 1930s, of course it’s common knowledge that many people in our country lost everything: homes, businesses, and stock fortunes. Most of those people eventually re-bought homes and settled into new jobs or businesses. But statistically many of them never invested in the stock market again. And although it took quite a few years before the stock market had regained its Pre-Depression values, eventually it did. And those people who refused to go back into equity investments missed out on profit for their portfolio for years to come.
There is much truth to the adage that when you fall off a horse, the smartest thing you can do is to get right back up in the saddle again as quickly as possible. Why? Because the longer you delay doing so, the more your fears take over and prevent you from overcoming them. It’s not just that the horse’s feelings will be hurt. It’s not to prove something to the watching world … because the world may not be watching. It’s to assure yourself that the fear you experience is not rational and, therefore, needs to be mastered.
The same applies to the current stock market. While what has been happening in the last weeks and months has been absolutely startling and shocking, with wild upturns and more downturns than a roller coaster, things appear to be settling down. A new president – and the election finally being decided – goes a long way toward giving stability to a market that desperately needs it.
Although there is much to be done to correct the problems that have caused the economic and market downturns in the first place, we can assume the government will focus its attention in the months to come on doing just this: solving the problems. After all, it’s what we elect officials for: to make things better.
So what does this mean for you? Perhaps you have lost 30 or 40 or 50 percent of the value of your portfolio. You have vowed to yourself that you will never let this happen to you again. So you have vowed to find somewhere else to invest your money. Well, where exactly would that be? Real estate? I don’t think so! It’s as scary as the stock market, with much less liquidity and ease of access, and more worries built in. Gold or silver? Not so much anymore; they are higher, certainly, in value, but not the great investment one might think in these times. CDs and money markets pay very small interest rates and look to be doing the same for a while.
So the best thing you can do in this economy and with a new administration is to do your homework now more than ever, find sectors that will stand up well in the next few years for whatever reason, and then find good companies within those sectors with good balance sheets, good prospects for the future, and buy them. Buy them a bit at a time, nibble instead of gulp, and then stop worrying. Watch them once a week or once a month, not daily. The daily fluctuations of this market will cause you to run to the PeptoBismol frequently.
And take a deep breath. Watch a movie. Chat with a friend. Keep on living. Life truly does go on, even past Election Day, for the losers as well as the winners, and for the stock market as well.
Which could make us all winners.
Rita is a successful private investor and leads four investment clubs where she has taught hundreds of women about stocks and finances. She is the chairperson of the board of an international non-profit organization and devotes much of her time to a variety of charity work.