Educate Yourself - The Myopic Investor

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The Myopic Investor
by Charles B. Carlson, CFA
Dow Theory Forecasts

It is easy to fixate on the market's short-term movement. However, smart investors understand three important points when it comes to investment success:

1)	Investing is a marathon, not a sprint. It's not how well you do over a month or a year that truly matters, but how well your portfolio performs over five, 10, and 20 years.
2)	How much money you make in the market five years from now depends on what you do today to position your portfolio for the future.
3)	The best time to upgrade a portfolio is during difficult markets, when stocks are down and upgrading opportunities are plentiful.

Admittedly, it's tough to keep from being nearsighted with your investments when you see their value eroding and the list of reasons for being bearish growing almost daily. However, by pulling back a bit, investors might gain some needed perspective concerning the market's movement.

For example, from September 21 of last year to March 19 of this year, the Dow Jones Industrial Average rose roughly 2,400 points, or 29%.

Big market gains in a fairly short period of time - this 29% advance took place in just six months - have to be digested by the market. And that digestion period is what has taken place in the last three months, with the Dow declining roughly 9% from the March 19 level.

To be sure, the market can move lower in the short term. However, despite the feeling of panic on Wall Street these days, what has been happening in the market in the last nine months is not all that atypical relative to market history.

Bottom line: Now is a great time to take advantage of the market's sluggishness and upgrade your portfolios. So get busy!

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