The stock market runs in a cyclical pattern and as prices drop, at some point they will be low enough to attract investors again who believe they can make money when the market turns around. An influx of investors tends to make the market rise. Sometimes, the market moves from strength to weakness and back to strength in only a few months. Other times, this movement, which is known as a full market cycle can take years.
Remember, at the same time that the stock market is experiencing ups and downs, the bond market is fluctuating as well but usually in the opposite direction. That’s why asset allocation, or including different types of investments in your portfolio, is such an important strategy. Therefore, be sure to invest in several types of investments at the same time, so that some of your money will be in the category that’s doing well at any given time.
Up next, learn to speak the language of stocks.
P.S. Missed a segment? This info and so much more about investing can be found in my ebook Investing 101: Everything You Always Wanted to Know About Investing But Didn’t Know How to Ask, which is available in August. Visit the MYM store at www.MindingYourMoney.net/store.htm to order your copy or for more info.
Patricia Stallworth, CFP is the president of PS Worth, a financial planning and adviory firm, the founder of Wise, Wealthy Women, and the author of Minding Your Money. Visit www.psworth.com and download a free series on investing.