“To bear trials with a calm mind robs misfortune of its strength and burden.” Seneca the Younger, a first-century Roman statesman.
It is humorous or sad, depending on your perspective, to watch how investors react to daily market fluctuations, especially those of the negative variety. How quickly the bravado exhibited during a rising market evaporates.
The lesson is that no amount of intelligence, learning or experience is foolproof when the market is stormy. And by any measure, the market’s moves in recent months have been extraordinary. Meanwhile, confusion reigns as investors try to apply ill formed logic to forecast each short-term market dalliance.
What so many seem to forget or simply ignore, is that in the finality of it all subjective human judgment and intellect must carry the day. Unfortunately, the realization that a carefully selected cadre of companies with rising earnings and dividends can be an effective defense is so often lost in the weeds.
While there is no substitute for human judgment, the human intellect will never be completely immune to the negative influence and ignorance of others.
Unfortunately, there is no dearth of investors who claim otherwise, leaving them vulnerable to a damning of their own making. A deadly curse of unrealistic expectations that hide such illusionary notions as an unrealistic degree of hope, wishful thinking, and perhaps a prayer or two.
Frequently those who are dissatisfied or disappointed because their desires for wealth were dashed on the rocks of reality, comment that Wall Street is merely Las Vegas in pin stripped suits.
While some speculative activities could be viewed as a sophisticated form of gaming, investing is not given that investing entails research and patience.
Investors are often tempted to fold their tent due to the Street’s seemingly aberrant behavior. While some of that behavior is of the Street,s own creation, a significant portion is attributable to the opaque decisions and actions of the corporate world.
The specter of the unknown can strip away all logic, making rationality impossible. As a result, investors often fall victim to such investment aberrations as Ponzi schemes, investing beyond their skill level, or simply finding themselves imbued with poor financial advice.
Therefore, it is of little wonder that many look in askance at Wall Street. Further complicating the issue is that among working adults, about a third have little or no savings. A quarter of those working adults have no savings for retirement. One in five believes they will never be able to retire.
Greeting jobs at Wal-Mart should not become a sought-after form of employment. However, if you really want to put off retirement until you can ì”call in dead”, then forego building a portfolio of quality dividend paying stocks.
And if you subscribe to the Pollyanna expectation that simply holding a passive or indexed portfolio will save your bacon then there is trouble in the Land of Oz.
As powerful as compounding is, it can be destroyed by the failure to accept short-term price aberrations. Volatility is never a reason to abandon your portfolio and exit stage left. Rely instead on the precept of investment quality to guide you through the precariousness of Wall Street.
Intelligent investing can counteract the symptoms of never being able to retire. Yet, there will always be those optimists who assume that one day their below average income will exceed their above average spending. Great, we call it the ostrich approach. That lack of foresight also lends itself well to the work-until-you-die lifestyle. Do you want Wal-Mart’s apply-by-phone number?
Oh, while you are deciding about the need for starting or adding to an investment program, keep in mind that the upper range estimate of out-of-pocket medical expenses in retirement for a 65-year-old couple is $235,000 to $376,000.
Those figures double for a couple with above average prescription needs and only Medicare and Medicare supplements. You might want to think about buying a larger piggy bank.
Lauren Rudd is a financial writer and columnist. You can write to him at LVERudd@aol.com. Phone calls accepted between 9 AM and 3 PM at (941) 706-3449. For back columns please go to www.RuddReport.com.