Tags: Housel | four | guidelines | investing

Motley Fool's Housel: Four Guidelines for Investing

By    |   Sunday, 26 October 2014 04:30 PM

The recent swoon of the S&P 500 index and the accompanying spike in volatility may have you made very nervous as an investor. If so, you aren't alone.

So how can you avoid making dumb mistakes at a time you're understandably feeling uneasy? Morgan Housel, a columnist at the Motley Fool offers four important points to keep in mind. 

  • "Changing your mind about an investment is very hard," he writes in The Wall Street Journal. "Convincing yourself to believe something that isn’t true can be easier than admitting you were wrong.
  • "What we think is tomorrow’s biggest risk rarely is." The tendency is to focus on the risks that already have taken place rather than those that will take place.
  • "Taking advantage of opportunities is harder than it sounds." For example, it's difficult to determine the best time to buy stocks during a decline. The solution is to buy small amounts at different times.
  • "Most investing is simple, but we complicate it. . . . A sensible way to invest is to assume companies will earn a profit, and assume the amount investors will be willing to pay for that profit will fluctuate sporadically."

Many individual investors believe that now is a good time to jump into stockA total of 49.7 percent of them were bullish about stocks for the next six months, the highest level since August, according to a survey by the American Association of Individual Investors (AAII) of its members for the week ended Oct. 22.

Individual investors "viewed the recent downward volatility as a buying opportunity," Charles Rotblut, AAII Journal editor, said in a statement.

"The pullback in the S&P 500 and the correction in the Russell 2000 made valuations more attractive and helped to alleviate concerns about stock prices having moved too far upward too fast."

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The recent swoon of the S&P 500 index and the accompanying spike in volatility may have you made very nervous as an investor. If so, you aren't alone.
Housel, four, guidelines, investing
324
2014-30-26
Sunday, 26 October 2014 04:30 PM
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