Stocks Lead, Don't Follow - REMIX | Series 10.2

Enjoy More 30s: Family Finance

Nov 14 2022 • 8 mins

Reminding ourselves how the stock market tends to work, how it is a leading indicator, can be a helpful emotional refresher course.

  • The stock market, if you remember is what they call a leading indicator. Basically, what that means is that it acts in advance of what people think is going to happen. (02:27)
  • Think the 2008 mortgage crisis or 2020 COVID. There was very little clarity at the time on what was going to happen next. And that uncertainty is what drove the volatility. (03:12)
  • So what you can do is really the hardest thing sometimes and that's just not touching it. You are probably reacting off of past information. (05:09)

Quote for the episode: "So if we accept that things are going to move ahead of time, that leading indicator before we will have a chance to generally react, then we can potentially avoid some of the big mistakes that too many investors make by pulling out when things are already low, and generally not adding money back in until things have significantly rebounded, leaving them with much less than they ought to have had, if they just not touched it throughout the ride." (06:03)

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