Investing With Clarity™ Blog

Is A Big Stock Market Correction Looming?

January 29, 2013 9:14:00 AM

Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves. - Peter Lynch

As I write this piece today, we are looking at the S&P 500 up over 5% year YTD. I also heard this morning that the DOW is having its best January since 1989!

With such a strong start to the year for equity markets, one must ask themselves, how much higher do the markets go before we see a correction?

My answer? Who cares!

After all, if you are a long-term investor, you are hoping for a stock market correction! Why?

Because it is stock market corrections that create the opportunities to buy companies you want to own long-term.

I realize, as statistics show, the average holding period today of a stock is just over 11 months. So, most investors, (I mean gamblers), are not long-term thinkers.

In other words, if you look at individual investor statistics, you will find that the average investor is not successful in owning stocks (or as I prefer to say, companies).

The reason? It's simple! They are not long-term thinkers or investors. Look at the statistics, they confirm my opinion!

I believe the key to successful investing has always been and will always be, investing in great companies over a longer period. One year, or even three years, is not long-term.

Unfortunately, many investors lack what I call, Investment Clarity. The understanding of knowing what you own and why you own it.

In other words, investors are more interested and concerned over the short-term performance of their portfolio instead of knowing what they own and why they own it.

In turn, investors sell their investments only to find themselves investing in other investments based on historical performance. Yet, they invest without understanding how the returns were achieved, including how much isk was under-taken.

Chasing returns has never proven to be a strong investment strategy.

So, the next time you want to look at making a change in your investments, my recommendation would be to ask a couple of simple questions to get some understanding in how your money will be invested, what would I own in my portfolio? Or, how are investment decisions made for my portfolio?

So, is a ig stock market correction looming? Who knows! As a long-term investor, my recommendation is to ask, when we have a big stock market correction, will you be taking advantage of buying great companies on sale? Of course, we will be continuing to invest in great companies during the next stock market correction!

After all, isn't that how successful INVESTING has happened in the past?




Mark Pearson

Mark Pearson

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