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Thursday, Mar 28, 2024
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EDITORIAL–Sit Back and Enjoy the Roller Coaster

Buy low, sell high.

Economists, brokers, traders and others who make their living pontificating on ways to make money in the stock market might say otherwise, but those four words sum up the basic objective in investing in the market.

Unfortunately, this long-running bull market is filled with investors who haven’t known many lows or, if they have experienced them, have pushed those memories out of their minds in the belief a positive outlook allows no nay saying.

The recent market drop , correction, if you prefer , sent a panic through many of these investors who weren’t used to watching the ebb and flow of the market. Many seemed not to have realized no matter how strong the market might be, there will always be a correction. And this market was well due for one.

Fattened on investment dollars from neophyte players looking for their share of the wealth and from the life savings of the nation’s workers stashed in mutual funds, the market was just too top-heavy not to turn topsy-turvy.

Investing has always been a bit like playing poker. Kenny Rogers, the country singer, was giving advice to more than gamblers when he sang, “You gotta know when to hold ’em, know when to fold ’em, know when to walk away, know when to run.”

Those looking for a quick return on their investments should have been selling off their shares at the peak of the market, while those in the market for the long run will stay the course no matter what foul weather they may encounter. That’s the way the game’s played.

However, a few wild cards will hurt certain investors.

Margin players, those investors who borrow money to buy overpriced shares hoping a continued rise in value will pay off their loan and interest and leave them with a tidy profit, lost big. Only fools gamble with money they don’t have. Playing that kind of game in the Old West would have gotten you shot.

Margin calls themselves exacerbate a correction as brokerages begin selling off shares bought on credit when margin players can’t pony up the money to cover their losses. The flood of shares being sold only speeds the decline of stock prices.

Dot-com investors took big hits, too. Persuaded to invest in dot-coms by commercials and ads created by high-priced marketing firms paid for with venture funding, these investors have only themselves to blame. Common sense dictates those venture funds should have been put to more practical uses , such as creating an actual product. The only persons making money in this area are the VCs.

The roller-coaster ride the stock market took last week was simply part of the overall game, not the collapse of the economy. If you want to play the market, be prepared for a wild ride. Sit back and enjoy it.

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