If you’re invested in the stock market, the month of August may have left you feeling a little woozy. Since August 1, the US stock market has had daily losses in excess of 4% three times (and is working on a fourth as I write this). It’s also had two days in excess of 4% gains. The second week of August particularly was a roller coaster (down 6.5%, up 4.5%, down 4%, and up 4.5% on consecutive days). If you regularly pay attention to your stock market investments, it’s enough to drive you crazy. If you are no longer working and are living off your retirement assets, it can be downright frightening.
The Wall Street Journal had a short article in its Aug. 16 edition on investing lessons drawn from Sam Walton (founder of Wal-Mart) and his family, the wealthiest family in America. It essentially boils down to two very important principles: 1) plan (and act) for the long run and 2) maintain as much financial flexibility as possible for the short run.
Good principles to invest by, and ones that can help make the short term volatility a little less stomach-churning.