The markets are going crazy these days: commodities, gold, silver, the stock market, real estate. How can you keep up? What should you do? Any change in the world condition can make the market react either positively or negatively.
Osama bin Laden is killed and the market goes up. The President makes a speech on Libya and the market jumps. A new poll comes out and the market dips. Seems like about anything can set it off, driving the indexes either up or down.
The problem is that people actually pay attention to these temporary fluctuations and try to time their way into making money by jumping in or out based on what's going on at the moment. Investments should be based on trends and track records, and those things take time to develop. Unless you are a seasoned investor and really know what you are doing, don't try to time the market to make money. The odds are not in your favor.
Don't be guided by emotion
Market fluctuations are based on emotion. Money has no emotions; it only reacts to the emotions of people. That's why we see all the craziness going on in the markets right now; people's emotions are running high for many reasons and the market is reacting to it. The key is to not play into the market vacillations by letting your feelings dictate your financial strategy.
These fluctuations are temporary, while your investment strategy should be long term. And remember, emotional choices are oftentimes not your best decisions in any area of life, especially when it comes to money.
Back to basics
Your financial security is a long-term strategy; therefore, it's time to get back to basics. The same old boring fundamentals for financial success still apply regardless of what is going on:
- Have a cash cushion equal to six months of your expenses.
- Before you even consider investing, make sure you have all high-interest debt,
like credit card balances, paid off.
- Make sure you are spending less than you earn, which around 40 percent
of people still aren't doing.
- Have a long-term strategy for financial security. Work with a qualified financial adviser who knows you and your situation and will help you achieve your long-term goals. Prosperity is a process and a slow one at that.
- And by all means, do not panic when you see temporary fluctuations in the
market. Take a deep breath, stay calm and stick to your plan--and if you don't
have a plan, get one.