All of the bad news out of Europe regarding their debt crisis got me thinking about how best we can all cope through these tumultuous times. It seems every time we turn around there is another crisis that results in some harrowing ups and downs in the market. I think we could all benefit from listening to lyrics from an old tune from Burl Ives, The Donut Song:
“When you walk the streets you’ll have no cares
If you walk the lines and not the squares
As you go through life make this your goal
Watch the donut, not the hole.”
Most investors spend far too much time watching the “hole” and forgetting all about the “donut.” There is always going to be a reason not to invest, always going to be something to worry about. In a lot of ways, the information age we live in makes matters worse. The constant bombardment of news, analysis and information on all that is wrong with the world weighs on our collective psyche. So let’s forget about the hole and turn our attention to the donut, the yummy part!
There has been quite a bit of positive data on the economy. The recovery is for real. It may not seem that way all the time but consider these facts: Corporate earnings are up. Companies in the S&P 500 are on track to earn $76 to $80 this year; up from $57 last year. The S&P 500 Index is up dramatically since the lows in March 2009, despite several pull backs along the way. We have seen five corrections of at least 5% since last March and this is to be expected. Stocks rarely go up in a straight line. The prior bull market runs that started at market lows in 1974, 1982, 1987, 1990 and 2002 all had multiple setbacks of 5% or more.1 April’s employment report was unexpectedly strong and signals that the economic expansion is still underway and that we may see the unemployment rate gradually start to come down. Consumer spending has steadily improved.
Patience is paramount to successful investing. When you focus on the positive it is much easier to be patient. “Watch the donut, not the hole.”
1. Barron’s, Bear Scare, May 10, 2010
Damien helps individuals invest and manage risk. He is a Certified Financial Planner™ professional and an Investment Adviser Representative of, and offers securities and investment advisory services through, Financial Network Investment Corporation, Member SIPC 1850 Mt. Diablo Blvd., Suite 170 Walnut Creek, CA 94596. These are the views of Damien Couture, CFP® and should not be construed as investment advice. The Standard & Poor’s 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. You cannot invest directly in an index. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Not all recommendations are suitable for all investors. Each investor must consider their own goals, time horizon and risk tolerance. Your comments are welcome. Damien can be reached at 925-280-1800 x101 or Damien@WalnutCreekWealth.com.