Does the Stock Market Have You Scared Yet?

December 1, 2011 6:16:00 AM

Volatility is good for you. -- Warren Buffett, CNBC November 2011

So, does the stock market have you scared yet?


If so, I don't blame you!

After all, most investors don't even know what they own or why they own it! And, if you don't know what you own or why, it would stand to reason that when the markets are as volatile as they are and negative press is everywhere, I would be scared too!

In the 18 years I have managed portfolios, I don't know that I have ever seen or heard so much negative sentiment about the stock market as I am hearing today.

Frankly, I hope it gets more negative!

Why? Because, in my opinion, it seems like most investors today are more interested in reducing their portfolio volatility and focusing on the ews of the day rather than taking advantage of buying companies on sale!

I can't begin to tell you how many opportunities are out there today for the patient investor.

Of course, if you are going to take advantage of buying a company on sale, you must be ready to OWN the company over time (3 to 5 years) and not 3 to 5 months!

The problem with today's investor is, many have their money invested in mutual funds and exchange traded funds (ETF). The problem with owning mutual funds or an ETF is, on any given day, you don't know what you own or why you own it.

Personally, I believe this is one of the main reasons why the average investor today focuses on reducing their portfolio volatility as opposed to embracing it and taking advantage of buying companies on sale.

This leads me to what I believe is one of the most important components of being a successful investor - CLARITY.

Why do I believe Clarity is so important?

Clarity is critical because the more an investor understands what they own and why, the more willing they will be to take advantage of one of the most powerful investment tools investors have available today.

What is that tool?

Strategic Cost Averaging&trade\; -- Although no guarantees, it's a strategy of investing unequal dollar amounts timed to specific market and/or company events providing an investor the opportunity to own shares of a company at a lower overall cost.

I realize many investors are trying to or have attempted to ime the market. However, what if your strategy was not to uy the market\, but instead, buy into a company... over time?

Volatility becomes your friend not your foe. Why? Because you look for volatility to create opportunities to buy the companies (not the market) you want to own over time.

Besides, after another two days of huge moves up in the markets this week, aren't you getting tired of trying to guess where the markets are going?


Mark Pearson

Mark Pearson

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