Reading the headlines of most financial news sites, one will notice a heavy emphasis on discussions around stimulus, and how the stock market rose or fell on a specific day as a direct result of discussions around stimulus.
While stimulus does indeed matter in the broad context of how consumer-oriented stocks will do, given the real impact this pandemic has on the ability of consumers to spend money, the reality is the real underlying value propositions of most stocks are not impacted materially by this news.
Buying or selling stocks on headlines is a great way to lose money over the long-term. Trying to time the market based on headline news or other reasons is a recipe for long-term disaster. Holding through market volatility (and preferably buying more on significant dips) is the best way to build one’s wealth over the long term. Over-reacting to market news can push investors out of the market during perhaps the best time to be invested.
When there’s volatility in the markets and difficult times are upon us, this happens to be when most rich people are buying stocks. There is a correlation between one’s risk tolerance and patience levels and how wealthy an individual is for this reason. Riding out the bad times, and rebalancing or adding to losing positions if necessary is the best way to focus on the long term. Ignoring the noise is difficult, but necessary, for investors to grow their portfolios long-term.
Invest wisely, my friends.
