These days, discouraging economic news can drag an investor down. After all, unemployment is still over nine percent, the housing market is still weak and economic growth is still slow. So, would now be a good time to take a break from investing? Actually, such a “vacation” could prove to be a mistake.
To understand why this is so, you‘ll need to look beyond the headlines. Once you do, you will find the following:
• Slow growth is not a recession. While the economy is not growing as rapidly as we might like, it is still growing — not contracting. And at this stage, most economists do not foresee the country falling into a “double-dip” recession.
• Corporate earnings are strong. As of mid-2011, we’ve seen five consecutive quarters of double-digit earnings growth, despite the sluggish economy.
• Stocks are priced attractively. Remember, if stocks have dropped considerably, for example, the seven percent the Dow Jones Industrial Average fell from late April to mid-June, 2011, many stocks become more affordable as measured by the price/earnings ratio of the Standard & Poor’s 500-stock index.
Given our current situation — a slow-growth economy on the one hand, positive incentives to invest on the other — what moves should you consider making? For starters, if you have been investing regularly, don’t stop. No one can predict when a new market rally will begin, but once it does, the biggest gains are typically achieved in the early stages — so if you are on the investment “sidelines,” you could miss out on some good opportunities.
A long-term perspective is imperative. When following the news, it is easy to get a “gloom-and-doom” feeling about the country’s prospects. America is still the most powerful economy in the world, and, as a nation, we have weathered every financial storm we have ever encountered – which means that you still have good reasons today to invest for tomorrow.
Finally, know that making decisions of this nature do not have to fall solely on your shoulders. Consider speaking with a financial advisor who can provide knowledge and resources to help you invest in a way that enables you to make progress toward your financial goals in all economic environments. Advisors can help you diversify your holdings among stocks, bonds, mutual funds, government securities and other alternative investments that can help reduce the impact of market volatility on your portfolio, while giving yourself more chances for success.
There is a saying that “tough times don’t last, but smart investors do.” Take these words to heart as you continue your journey through the investment world.
This article is provided by Pamela J. Carty, AWM, a Financial Advisor at RBC Wealth Management in Bend, Oregon, and was prepared by or in cooperation with RBC Wealth Management. The information included in this article is not intended to be used as the primary basis for making investment decisions nor should it be construed as a recommendation to buy or sell any specific security. RBC Wealth Management does not endorse this organization or publication. Consult your investment professional for additional information and guidance. RBC Wealth Management does not provide tax or legal advice.
RBC Wealth Management, a division of RBC Capital Markets LLC, Member NYSE/FINRA/SIPC.