Market Risk
Historically, investing in the stock market has
provided above average returns relative to bonds and cash. However,
several studies have shown that most individuals and even professional
investment advisors who invest in stocks and equity mutual funds
have been unable to consistently achieve market returns.
Most investors look to the equity markets with
the assumption that their investment is safe if they are willing
to stay for the long-term. But how long is long enough?
No one knows what the future holds, but it is important
to bear in mind the uncertainty concerning stock market performance.
The bear market of 1973-1974 wiped out all of the spectacular gains
of the 1960’s and took the market back to 1961 levels.
The stock market crash of 1929 wiped out all of
the gains of the previous 33 years. An investment at the top of
the market in 1929 had to be held until 1954 before showing a hint
of profit (after adjusting for inflation).
The market has a history of registering many marvelous
up years, but has also suffered through some breathtaking down years.
This unpredictable behavior is expected to continue. Adding to the
unpredictability of the market is the fact that any change in expectations
will cause emotional up and/or down movements in the market.
Investing or Gambling?
As a society, we have placed our faith, hope and
dreams in the upward movement of the stock market. We have stored
our pensions and retirement accounts there, along with our children’s
college educations funds and most of our life savings.
As investors, we have experienced the jubilation
of a roaring bull market and the horrible carnage wrought by a grisly
bear market, accompanied by colorful corporate scandals.
If unprotected against loss, an investment in the
market subjects the investors’ underlying principal to potential
losses. Just like gambling at a casino, a fortunate few will walk
away winners while many of the players lose.
The simple realization that the market can move
dramatically and unpredictably both up and down calls for an investment
plan that takes all measures possible to protect against the risk
of loss while allowing for upside participation.
Conclusion
- It is impossible to predict the direction of
markets and the future level of stock prices.
- There is a risk of missing out on opportunities
for gains by not investing in the market.
PM Investments focuses upon the return of
our investment as well as the return on our investment.
We offer solutions for survival in the perpetual high-risk environment
of stock market investing!
Don't let your
investments go up in smoke!
Click here for more information
on our strategies.
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