Some 24 years ago when I started in the financial service business, there was an investment firm that had the most popular commercials. Back then, everyone knew the commercials. I mean EVERYONE. It wasn’t just the investors of those days that knew of the investment firm. It wasn’t just the rich and wealthy. It was the steel mill workers, the stay-at-home mothers, the coal miners, and even the poor college students knew of this firm.
Do you remember E.F. Hutton? Of course you do! Well, if you’re older than 30-something, you would remember those attention getting commercials. There was the one commercial when two businessmen were having lunch in a noisy restaurant. However everyone in the restaurant went silent so they could overhear the businessmen’s words when he said, “well, my broker is E.F. Hutton and E.F. Hutton says . . . “. There was the one when two tennis players stopped play in the middle of the volley when a spectator blurted “well, my broker is E.F. Hutton and E.F. Hutton says . . . ”
What is the Fed going to do?
It reminds me of today’s investment world, but instead of E.F. Hutton, it’s the Fed and Ben Bernanke. Everyone wants to know what the Fed is going to do. Will they “tapper“? Will they “ease“? Will the Fed be influenced by the corporate earnings reports for the quarter ending on June 30th? Will the unemployment numbers indicate a move towards the 6.5% target? Will the Fed buy or will the Fed sell? And it just goes on and on.
Every investment firm on the globe is closely monitoring every word from the Fed. It seems they are the tail that’s wagging the dog. I realize that the Fed is important to the well-being of our economy. After all they are dumping $85 billion into the U.S. economy per month. Yes, per month. I understand that the Fed’s guidance is crucial to getting us back on track. However I wonder if we’re missing something. Or maybe not. It has been said a number of times, “don’t fight the Fed.”
Could long-term investors (those who are investing for financial goals that are at least 3-5 years away) be so concerned about what the Fed may do, that they miss out on long term results? Is it proper to worry about an account value going from $100,000 to $98,000 in a month or two when you don’t need the money today but 10 years from now? If and I say if, the Dow will hit 20,000 over the next 5 years, by the year 2018, are we concerned that the Dow may go from 15,000 to 14,000? Or even, 13,000?
Today the Dow is about 15,000. When I started in this business in 1989, it was 2500. Just 5 years ago, it was 10,000.
Let us encourage you to think about your goals, and if those goals are long term goals, let your investments be positioned for long-term growth. In those 24 years, I’ve seen people accumulate wealth, but never over months.
The coming months are sure to bring volatility, but that means opportunities. It also means that the patience of investors will be tested. Looking past the short term and sticking to your long term plan will be key. Stick to the plan!