Develop Your Long-Term Investment Strategy and Act with Conviction

Develop Your Long-Term Investment Strategy and Act with Conviction

The Sunday New York Times business section of November 3, 2013 featured an article by Jeff Sommer: The Dangers of a Market Melt-Up. Sometimes it is helpful to read such articles or headlines and think to yourself, “How could this report of danger influence my next 30 years?” If you are focused on the long haul, like we are, you do not have to be seized up with fear at every headline or article about the stock market, although the media would very much like you to pay a lot of attention to one or another near-term drama.

If you know your risk strategy, and have built in some conservative return assumptions, you will be better able to weather these dramas. Yes, there will be ups and downs, and now we have to worry about the “Melt-Ups,” too. From a more long-term perspective, if you have a means of tracking your own “risk and return” results, you will be able to track your own progress toward your own goals, and keep your eyes on the prize: your financial future working out. With a good financial plan in place and an advisor who has earned your trust, you should be able to track your “real” progress accordingly. Rather than getting embroiled in the ongoing drama, you definitely need to pay attention to you and your savings. Unfortunately, too few Americans are currently doing so.

As Sommer reports in his aforementioned article, Edward Yardeni, an independent economist and strategist, is concerned that investors are too complacent right now—that they are not worried enough about the stock market. It’s not clear how Yardeni would know how much investors worry or not about the market, unless he assumes there is a direct correlation from worry to behavior. He is not worried about current price-to-earnings valuations, he notes that corporate earnings continue to increase, and he believes this will persist. He is worried that the market will go up too fast and head into a melt-down.

A far more relevant danger is reported by the National Association of Personal Financial Advisors (NAPFA): 39% of U.S. adults have ZERO in non-retirement savings, and their retirement savings are woefully inadequate. The Statistic Brain website ( reports that the average 50-year-old American has $43,797 in savings, and 36% of Americans have not saved anything for retirement.

This behavior is the true danger for all of us living in the U.S. It would be a noble call for the media and advisors to work consistently to reverse the dire financial future for most Americans, which actually has very little to do with the stock market per se. We heartily acknowledge and respect all individuals who are willing to look closely at their financial location and implement practices that will take care of their future, including old age and death. This level of adult behavior is unfortunately fairly rare. What is much more common is a plethora of day-to-day fear-based reports on the perils of the stock market.

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