2016: Lots Of Doubt And Pessimism For Stocks

2016 is here and we started the first day of trading with the biggest loss since 2008. At one point the Dow was down over 400 points before recovering slightly. Now as I write this on 1/5/2016 in the morning, the major markets are slightly in the red again as investors are obviously reluctant to step in and buy with conviction.

2016 is widely being reported as a year where the stock market is going to do much the same as it did in 2015. That means it is going to be volatile with sharp ups and downs and often lacking direction. The narrative being written right now from many sides is that 2016 will be another losing year.

Its never easy to make money in stocks and especially difficult with the whole market going down. The best way to invest from my perspective is to try to always pick companies with solid balance sheets and good products that people like to buy. Then hold those stocks no matter what the overall market does. You may not make money in that type of stock every year but over the long haul, that type of company will win out.

Years like 2015 and now perhaps 2016 will test your mental strength. Many investors just don't have the inner fortitude to hold on to their stocks when the market starts gyrating. The modern investor seems to focus more on short term gains and lacks the risk tolerance to stay strong when things don't go their way. That means the short term losses pile up and they get more involved in a guessing game that they are sure to lose.

Please do understand though, that buying stocks and holding them does take some work in today's quickly moving business environment. New industries and new ideas are constantly popping up that may challenge the companies you own. In other words, you don't want to be the investor who bought Kodak or Nokia only to find after sitting on the stock for 10 to 20 years that those companies are nearly bankrupt, both in ideas and in real dollars. You need to keep abreast of the industries and companies you own to make sure everything is going smoothly.

2016 probably won't be the year investors would like it to be and it may turn out to be one where a lot of defense is needed. But that means you might start searching for those companies that you think will do well in the next five years and see if you can pick up some of their stock at a discount, or at least at a price lower than they were selling for in 2015.

No comments: