Market Ups and Downs

The stock market went down quite a bit last Friday.

I often notice that this upsets lots of people who, like me, contribute regularly to broad index funds for retirement savings.

Unless one thinks that the loss indicates a severe, lasting, problem with the economy, I don’t think that this makes much sense. I admit that I like to look at my balances, and reflexively prefer to see higher paper-values to lower ones. But, a little thought helps me get over this reaction and realize that these drops are nothing to worry about.

The way I like to look at it is that one should remember the adage that it’s good to “Buy low and sell high.” One should consider whether he expects his near-term trades to be predominantly buying or selling. If it’s buying, then a temporary drop in prices is a good thing, because you’ll be getting a bargain on your purchases. As long as one expects the market to rise in the long term, he should be happy, as a buyer, to see some low prices along the way.

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