I recently read an article on Marketwatch titled “New Doomsday Poll: Image may be NSFW.
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99.9% Risk of 2014 Crash.” I had to do a double-take as I wondered if it was a real article. Well, it is sort of real. The media will run things like this from time to time, and its mostly because it draws interest. As soon as the market sees a period of volatility, who is the first person CNBC calls? Dr. Doom himself, Nouriel Roubini. Why? Because drama sells.
Could the market crash in 2014? Of course. Is is 99.9% likely? I highly doubt that. For the average investor, stories like this don’t help. It is difficult enough to navigate the investment waters without this piling on. The Wall Street machine typically makes things complex and difficult. They want you trading on the latest “trend.” Why? Because if your investments are constantly in motion, they make money.
I’ve been investing for long enough to know the basics, and more importantly, what I don’t understand. I know that I don’t need complex investments to succeed. Index funds are great because they are incredibly cheap, and they accurately track the index they are tied to. You get a virtual guaranteed return of what that index returns (minus fees, of course). No more, no less. Wall street doesn’t like index funds because they don’t make money on them. The media doesn’t like them because they are boring. But in this case, boring is good.
Need some ideas on where to get started? Check out Vanguard.com. You can also see my detailed post about index funds here. If you’re currently with another brokerage, most offer some low-cost funds as well. I’ve used both Fidelity & Schwab and they have some good offerings to get you started.
And what about those crash predictions? You can let that noise pass by without another thought. If the market pulls back meaningfully, it will just be another opportunity to buy more shares at a better price. Index investing also means your portfolio won’t be decimated if a single company comes apart. So you can forget worrying about earnings announcements or if the hedge fund XYZ is trying to shake up the board of directors. All you have to gain is extra money and time. Who doesn’t want that?
You can track all your investment accounts, asset allocations, and expenses in one place, at Personal Capital, which is a service I use and recommend.
Image may be NSFW.
Clik here to view.
Readers, what do you think of this type of media? Is it irresponsible? Does it have any value to investors?
