When investors talk about the Recession of 2007-2009, some actually quiver. Although things have improved since then, nearly everyone took a hit. On top of that, some people are still suspicious of the role of the federal government in the market: they think the government might be influencing interest rates. The dual impact of the recession and investor suspicion has led many investors to be too conservative with their investments as the market strengthens. In addition, investor reticence to hold onto equities as long as they used to is affecting investors’ chances of reaching their portfolios’ potential.
Investors should understand that the current market is very different from 2008. In addition, interest rates are primarily affected by supply and demand – not the federal government. Essentially, investors need to clear their heads and reevaluate how they approach the market.
According to Mark Matson, who recently appeared on the Fox Business Channel, investing gingerly and acting as though another recession is just around the corner could be very limiting. Mark discussed the basics of market supply and demand and explained a simple economic concept: if people aren’t buying a product or service, the demand is low and the price stays down; if a product or service is in high demand, the price will rise. The forces of supply and demand allow sellers to price more competitively. A common example of this principle can be seen in the price of oil, although there are a number of other factors that help to determine the price.
At any rate, the principle of supply and demand applies to the stock market as well. This causes problems for day traders who constantly have to worry about market ups and downs, as well as the timing of buys and sells. In short, this strategy is too risky for many investors.
Mark Matson and the advisers who follow his philosophy are committed to owning and holding equities for the long term. Of course, it’s worth noting that not all strategies are the same, nor does past performance guarantee future results. Nonetheless, advisers who follow the Matson Money strategy coach their clients to hold onto their equities, because what’s hot today could be cold tomorrow. Additionally, they stress the importance of a diversified portfolio that has the potential to survive market gyrations even.
At the end of the day, investors should understand that supply and demand are the primary market movers. There is no reason for investors to remain so conservative if their equity investments are well-diversified.