Market Peak

The stock market recently surpassed two very meaningful price points.  The Dow Jones surpassed 14,000 and the S&P 500 reached 1,500 for the first time since 2007.  Many people are now starting to wonder whether we are “due for a correction” or are we at a market peak.  As I write this article the market indeed has pulled back from these highs.  But what, if any, influence should these index levels have to do with investing long term?

I think there are at least a few important questions to consider when this type of thinking creeps into our heads.

Market Pullback

Another well-written blog was recently posted by Dan Wheeler concerning the recent market pullback. Click Here.  The main idea of this great perspective can really be summed up in two points:

• Trying to time the market during these pullbacks is a futile exercise that almost always leads to more losses.
• A long-term investing focus with emphasis on diversification and low costs is clearly the best way to have a successful investment experience.

A third point may be a useful addition for the especially nervous investor:

• We cannot successfully time the market reversals, but we absolutely do try to predict them to happen.  One popular risk measure of the market, called volatility, is always a key input in determining a client’s portfolio and retirement projections.  If the market did not experience this volatility then that would be the real surprise.  The market swings can be disheartening if we have a short-term perspective, but some reassurance should come from thinking “I am glad my advisor already planned for this to happen.”