Rally Shows Why You Keep a Steady Hand

Posted: Oct 11, 2011 12:01 AM

What a difference a day makes, or even a week. It was little more than a week ago -- Oct. 3 -- that the Dow Jones industrial average closed at 10,655. An early sell-off the following day pushed stocks into bear market territory, with an intra-day decline of 20 percent from the highs of the year. But that day, the market rebounded to close with a gain.

Ever since, the bears have been licking their wounds. The market has gained 7.3 percent from that day's closing loss. 

Monday's 330-point rally in the Dow, to a closing at 11,433.18, is a great demonstration of how futile -- and even dangerous -- it is to base your investment strategy on one day's headlines, whether on the upside or on the downside.

There's been no substantial change in the market-moving news. Yes, there is hope that Europe will get its act together and limit the damage caused by Greece. But those hopes could easily be dashed. The latest U.S. economic reports, especially those related to jobs, continue to show anemic growth -- but at least not negative numbers.

Quarterly earnings reports will be revealed this week, likely showing the same number of surprises to the upside as to the downside.

In short, the current market is ruled by emotion. And it's the emotions that are volatile, not the economic reports.

The Dow is within 150 points of where it started this year. And that difference could be made up tomorrow. 

But in between, according to Dow Jones Indexes, so far this year the market has traveled 20,301.98 points, if you total each day's closing change! 

You can save a lot of wear and tear on your emotions and your wallet by keeping your eye on your long-term goals.

And that's the Savage Truth.

Terry Savage is a registered investment adviser and is on the board of the Chicago Mercantile Exchange. She appears weekly on WMAQ-Channel 5's 4:30 p.m. newscast, and can be reached at www.terrysavage.com. She is the author of the new book, "The New Savage Number: How Much Money Do You Really Need to Retire?" To find out more about Terry Savage and read her past columns, visit the Creators Syndicate Web page at www.creators.com. COPYRIGHT 2011 TERRY SAVAGE PRODUCTIONS

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