THAT SICK FEELING IN THE PIT OF YOUR STOMACH

We've now all seen first hand what a panic sell off in the stock market looks like. For anyone who owns stocks, they've also felt what it FEELS like too: a tight feeling of uneasiness and helplessness that sticks with you the whole day and makes sleeping at night a very difficult.

There is no doubt that the 500 and 600 point down days on Wall Street we have just seen were based on economics and news but fueled mostly by sheer panic. After all, nothing really changed in the last week or so except a lot of added coverage of the debt ceiling debate and the credit downgrade over the weekend. These problems have been years in the making and aren't brand new. But the wall to wall coverage spooked people and made them want out at any cost.


Fear and greed are primary motivators in the stock market and right now fear is on display for all to see. If you are thinking of buying, you might want to wait a bit because it might not be over. As I write this the market has just given back all of it's 200+ point gain on Tuesday and is now down close to 200. My advice? Don't get too greedy just yet because you might get burned as we could have more down days ahead.

If you want to be a long term investor, you have to have the ability to sit back and do nothing. You have to have the stomach to take the losses when the world looks like it is ending. You have to have the confidence that with time, the market will come back. There is no guarantee of course. But history has shown that so far, the stock market has ALWAYS come back. You really should have a long investing time horizon so that you can wait these things out.

In times of high volatility like these, there is a lot of added interest in stocks. People who aren't lifetime investors see the market as the lead story on all newscasts, newspapers, and of course the Internet. They get interested in maybe picking up a stock or two while it is on sale. But what they really should be doing is picking up a copy of Stocks For Dummies or some other such book and learning the basics first. Don't just jump in without knowing the risks, especially at a time like this!

PROOF THAT INVESTING IN STOCKS IS IMPORTANT

There is a news article out today that is in all the major news services detailing how the wealth gap between whites and minorities has widened in the last 25 years. I think this story is very misleading because it is all about race when the real story should be about EDUCATION: people who have access to education are doing better than those who don't. This graphic should have groups split into "education" and not "race":

This story talks about skin color, politics, and all sorts of other issues that I won't discuss further because they have nothing to do with the stock market. However, stocks were mentioned twice in the article as being one of the reasons whites are doing better than some minorities.

Apparently whites are apt to have more of their money and savings in the stock market than minorities are. They might own individual stocks, 401K's, and mutual funds that have rebounded nicely since the crash of 2008. Minorities, on the other hand, are more likely to have most of their money in real estate (their houses) where we have seen valuations NOT go back up.

Stocks are never guaranteed to do well but over time they have always outperformed all other forms of investing. Everyone should have the opportunity to invest in them. It is also true that the earlier in life you start investing, your chances of making a good lifetime return are increased. However, it is understandably hard to get interested in the stock market if you don't have any money to invest! Why would someone pick up and read a copy of Stocks For Dummies if they don't have any money, right?

If there is anything you should take away from this it is that all kinds of education are very important. The basics of the stock market and investing in stocks should be taught early on in schools if we want to raise kids that will have a chance to do well financially in life. Everyone should have access to information about the stock market and how to invest in it.

Poor people not only don't have money to invest but it is also unlikely that they have the knowledge of HOW to invest it if they if their fortunes changed. The stock market is and always will be very confusing to most people and something that is looked at as a playground for the rich. In reality though, it is anything but that.