Take Six Months Off From Stocks?

A recent article from Bloomberg Business encourages investors to take a six-month holiday from the market.  I have a few things I would like to say in response:

1. There is no such thing as taking a break from investing. You cannot take time off to be on the sideline. Whether or not you are active in stocks, you are still investing. You are always investing your time. Regardless of where you put your monthly – stocks, real estate, cash savings, or gold – you are still spending time determining where to put it. You cannot simply ignore investing for six months.

2. If you sell all of your stocks and put your money into cash, you are relying on the hope that the value of the dollar will go up. Your cash will likely lose value over time. Sitting on the sidelines for six months will not help you build wealth.

Investment Education Matters
My biggest concern when I come across articles like this is that people will blindly accept whatever the “expert economist” tells them. Although we have no idea who Steven Jakobsen from Saxo Bank is, many people will take his advice of selling their stocks and waiting for six months. They won’t even take the time to question his logic or evaluate what is best for their investments.

Education gives us choices. With the four pillars of investing, we come to understand fundamental analysis, technical analysis, cash flow, and risk management. This gives us the basis of education so that we can evaluate what is actually best to do in investing instead of taking someone else’s word for it.

I might use my knowledge of the four pillars of investing to look at Jakobsen’s theory behind selling stocks and taking a six-month break from the stock market. Perhaps instead of selling stock, as the article suggests, I can tighten by stops. That way, if the market goes down I will already be using stops to have more control.

By using the four pillars of investing and by having a basic education, you will open yourself to more choices in investing. Without an education, you are extremely limited in your options for investing and will always have to take advice from “experts.”

Education Does Not Solve All Problems
Although we may have a deep educational background in investing, there are always going to be problems and challenges in the market. Twice this week the market has had shortfalls. It is the lowest we’ve had in nearly a year. This week, there have also been a lot of missed in both the ADP and the Bureau of Labor Statistics.

The Bureau, in particular, has a huge shortfall in the market this week. The market was at 126, but they had predicted 250. The huge discrepancy in the miss her is a bit of a head-scratcher. I don’t think they’ve missed like this in over a year. We’ll have to wait and see how the market reacts to this.

A Dynamic Investor is a Wise Investor
Taking six months off from investing does not seem like an approach that I would be interested in taking. I’m going to be actively looking at things, both from a fundamental analysis and a technical analysis standpoint. I’m going to take a dynamic approach by using my education to think creatively about my investments. Attempting to watch the market from the sidelines is an unwise approach to investing.