Watching the markets free fall is not fun. It's hard to resist being captivated, or terrorized by the news lately. But, keep your eye on the long term prize, or you may find yourself making silly and costly mistakes.
To quote the influential economist and professional investor, Benjamin Graham, "The investor with a portfolio of sound stocks should expect their prices to fluctuate and should neither be concerned by sizable declines nor become excited by sizable advances.” Wise words from a wise man, but that sound advice does not lessen the pain investors might feel during turbulent market times. Emotions can play tricks on you when it comes to your money, after all, we are only human. But, while 2008 is a market year we’d rather forget, the reality is it’s not one that is likely to put anyone with a well diversified portfolio in the poor house.
The stock market is a great place to make money over the long term. It has a great record of building fortunes after decades of saving and investing. If you're a long-term investor, you don't need to care where the market is right now. Rather, you should care about where stock prices will be five years, 10 years, or more into the future. The essential thing to remember is that the economy and the markets move in cycles, and a steady, sensible approach will carry your portfolio through good times and bad. Yes, this is hard to digest as you see prices sliding, but it’s the same sensible advice I’d give to my own mother. You must accept the bottom end of risk, if you’d like to benefit from the upside of risk—that is after all, how people profit from the stock market.
