Monday's classic E-mail question wondered: "Is this the real thing?" The reference was to the 3-week spurt in the Dow Jones Industrial Average, but the meaning was much, much greater than that, speaking as it does to basic misconceptions that most people have when they consider the stock market.

 

First of all, they think that the DJIA is the stock market. It clearly is not even close. Next, they need an "expert", any expert, to proclaim that higher stock prices make it "safe" to start buying again, because this is the only place on earth where it is "savvy" to buy at high prices and sell later, at lower ones. Another is the between the lines notion that someday we will have a stock market rally that never ends and prices that go ever higher, and higher and...

 

There is more in those five little words (Is this the real thing?), but the point of this message is not. "The Market" has never and will never be a one way "ticket to ride" (everyone in my generation should now be smiling). None of the important aspects of the "ride" (advances, declines, speed, beginning, or end) are predictable, by anyone, no matter how overpaid or well credentialed. It has become clear to me over the thirty years that I've managed to muddle through the investment exercise, that most of the mistakes are made by people who over complicate the process. This is not at all rocket science. In fact, the only science(s) that are at all helpful are economics and management...mostly management.

 

Management, for example has you looking for worthwhile merchandise, quality things to inventory for later sale at a reasonable profit. It includes the discipline, rules and procedures that are necessary to create, implement and control a "PLAN". Nothing more is needed, but to choose a train with a conductor who knows how to control the trip to an actual destination. If you have not been taking profits over the past few weeks, if you have been buying stocks (or mutual funds), if you have been selling fixed income securities to "realign" or to "reallocate" your portfolio, you are on the wrong track. If your EQUITY portfolio market value is not at or very near an All Time High, you have been on the same train for much too long!

 

There is no right or wrong, no good timing or bad. There is decision making under uncertain conditions, and no person ever became poorer by taking a profit. Always, yes always, sell too soon!