September 30

Coffee With Mike- Why Is The Market So Volatile?

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There's always that argument of "which way should I invest my money." There were a bunch of guys some time ago who decided the best way to invest money is to use a computer. Wall Street agreed with them and began to offer those types of investors computer condos close to Wall Street. What that did is it cut down the time it took for them to place an order. Then these guys got mathematical quants- people who understand algorithms- to build algorithms for the market, and put it inside those computers, and they did that. 

Michael Lewis, who wrote The Blindside, Moneyball, The Big Short, and some other books about the market too, he wrote this book called Flash Boys, and it's about those people who are math quants, who are using computers to generate all these trades in milliseconds. So, if you want to understand why it is that the market is so volatile, it's because people are using computers, and those computers are filled with algorithms, and the algorithms go off when they go off, and we've got a 24 hour market now. Not just in the US, but when you consider the entire world, there's something going on in a market somewhere, at some point every moment of our day. 

So, when you realize all that, we should expect a lot of volatility. We should expect that there's going to be a lot movement in the market. But things can happen in a second, and if we do understand that, if we do expect that, that's a realistic expectation. I really believe that. Then sudden drops and sudden rises in the market don't get you all bothered. You just see it as: now it's just part of what's happening today. Just because they're doing it doesn't mean you should be doing that. 

What you should be doing is whatever you feel most comfortable with. Whatever meets your needs, your goals, and gives you the most comfortable ride. In other words, you have the most confidence in the strategy you've chosen. Hopefully you're doing that, and as we help people do that, I think that's what gives people the peace of mind they're looking for. They just want to know a little bit more. They don't want to be pros, they just want to know a little bit more about what they're doing with their money, and why. 

"We should expect that there's going to be a lot movement in the market. But things can happen in a second, and if we do understand that, if we do expect that, that's a realistic expectation."

When they find out what that is, all of a sudden the lights go on, and they go, "Yeah! That makes sense!" and they feel better, and they're able to endure whatever they have to experience in the market. I hope that's also true for you. If it's not, give us a call, send us an email, respond on the website. We'd love to be able to help you. We're here to teach you, to figure out why you're doing what you're doing, and why you should have confidence.  

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