This week’s newsletter starts with a strange subject. Why would I say bad news when the markets are rising again?
It’s bad news for people who want to invest, as they will get lesser units for the same money, and good news for those who want to sell, as they will get more fund value.
A lot of small investors spend a lot of time — far too much — worrying about their investments. They worry about whats happening to their money today as opposed to thinking about it when they need the money..
What happens next is all too predictable. One position rises and they pat themselves on the back. Another one falls and they grumble and blame “the market” or some equally nefarious force in the background.
Then, a familiar pattern appears. Fearful of taking more losses, the investor begins to focus on the losers in the bunch. For a while, the winners offset the losers. Then the paper losses mount and the pressure is on.
Just when things are at their worst — the whole portfolio is negative for the year! — the investor decides to cut his or her losses. The dog gets sold.
Over those years, the dividends pour in slowly every year. That money is reinvested automatically. Likewise, earnings growth is steady over the long run as markets rise over time. This translates into steady appreciation across the whole market. And, just like that, you compound your money, year in and year out, just by investing and holding without fear.
Global stocks surged the most in 3 1/2 years, as U.S. equities joined a rally that pushed oil to its best two days since 2009 on speculation that central banks will expand stimulus measures to counter turmoil in financial markets. Haven assets from Treasuries to gold retreated.
MSCI Inc.’s gauge of the world’s equities climbed 2.6 percent as benchmarks from Asia to Europe and America rebounded from one of the worst starts to a year on record. The Standard & Poor’s 500 Index capped its best day in six weeks.
European shares enjoyed the biggest two-day rally since 2011, while the euro fell to a two-week low on the European Central Bank’s signal it may bolster economic support. Asian stocks climbed the most since September on speculation Japan and China may also take steps to calm markets. Yields on 10-year Treasury notes rose above 2.05 percent.
The turnaround in sentiment came amid signs central banks may be prepared to act after $7.8 trillion was erased from the value of global equities this year on China’s slowdown and oil’s crash. Diminished inflation expectations and a strengthening yen are seen as increasing pressure on the Bank of Japan to enlarge stimulus at it's meeting next week.
China will keep intervening in its equity market to “look after” investors and has no intention of further devaluing the yuan, Vice President Li Yuanchao said.
Regular savings plan - Invest in the S&P500 regularly and get a minimum of 140% of what you put in at the end of the term, or the actual market performance whichever is higher.
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Amit is an Independent Financial Advisor, based in Dubai since 1997. He is part of the prestigious ‘Million Dollar Round Table’ (MDRT), which is an elite club of the best financial advisors worldwide. He has authored the ‘6-Step Financial Success Guide’, and the book ‘Creating, Preserving, Distributing Wealth’. He helps business owners and professionals ‘Create A Second Income’ through investments.
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