Stock Market Investing

Investing in the stock market has historically been one of the best ways to secure a decent rate of return on your money and grow your nest egg. Most studies have found this method to earn at least 10% per year on average before inflation. However, some years can be horrible. The stock market was down over 37% in 2008 which was the worst year for the market over the past 50 years and our nest egg was severely depleted, but eventually restored.

For years we were content to pay a certified financial planner (CFP) to manage our stock market investments. A CFP is a fee based professional whose fee is a certain percentage of your funds each year, 1% in our case. Using a CFP is definitely the way to go if you’re going to use a person or firm. Non-CFPs are incentivized to steer you into investments where they make a commission off you and then they’ll charge a fee on top of that. Anyway, we tired of watching our CFP keep us in pretty much the same original investments every year, and only in mutual funds. We decided to try taking the reins ourselves.

Stock market investing is a very tricky business. It is fraught with perils and risks and is not meant for everyone. Some have compared it to financial gambling. So if you’re fearful of risk, feint of heart or prone to panic attacks, avoid stock market investing and stick with secure no-risk (but low earning) investments.

Since we were not trained in this industry and complete neophytes we decided to rely on the experts. We subscribed to a few advisory sheets, listened to many podcasts and did a lot of research. We created spreadsheets to chart the recommendations of around 7 reliable sources. When there was a good consensus of when to buy a stock we dove in. However, we’re still somewhat shaky on when to pull out of a position. It seems there’s far less consensus on this move.

Luckily, we foresaw the drastic market downturn in late March and divested in most positions before this huge plunge in values, saving us mucho dinero.  We then reinvested during the dip and have made significant gains during the recent ironic surge despite the pandemic.

We’re now slowly divesting again in anticipation of possible market volatility associate with the upcoming election chaos that’s sure to happen. But it’s all speculation. Trading this way is risky. You have to make 2 correct decisions: when to exit the market and when to re-enter. The conventional wisdom is to pick good, solid value investments and stick with them long term during the guaranteed ups & downs of the market & economy.