Editor’s note: This article was first published in October 2010, in the aftermath of the financial crisis; its view that the market would leave the bear market very soon reflects that moment.
In the small investor community I’ve noticed something: the vast majority are scared and lost. They don’t dare to invest, and they know that the stock market is going to leave the bear market very soon, so they aren’t taking any risks right now. They’re finding that their own analysts and advisers can’t tell them where to invest. Mind you, there are plenty of opinions, but each one points somewhere different.
This uncertainty and reluctance to invest, combined with the certainty that the market is going to change, may mean that once the crisis is over and everything is back to normal, these small investors forget that there are always risks, in good times and in bad.
Your adviser isn’t going to guess the future of shares, either now or later. This is something you shouldn’t forget, because it has happened before.
In fact, long-standing investors have made money in both bull and bear markets. If you plan to invest for the long term, look for shares in a company that you’re sure will come out of the crisis stronger. A share like that is a safe bet (in the long term).
Right now you need to be very careful when looking for quick short-term profits, because the current market volatility can play tricks on you.
That doesn’t mean the risks are very high now and will disappear once the market improves. Far from it: those risks will always be there, so keep an eye on your portfolio when the situation changes, and don’t lose your head thinking that everything you touch will turn to gold.
See also: Warren Buffett’s investment portfolio in 2011: where he invests
As Spain’s traffic authority puts it: “Drive carefully on minor roads, but pay attention and stay cautious on the motorway.”
Further reading
Featured image: Albert Anker, Public domain, via Wikimedia Commons.
