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The Worst Investing Mistake You Could Make Now

Many investors are understandably nervous when it comes to what the markets will do this week. Some are downright agitated.

My take? Keep calm.

The markets are doing what they need to be doing right now. The big swings we're experiencing lately are not a sign that the markets are broken. Far from it.

On the heels of a 137.43% run off March 2009 lows, the pullback we experienced last week was absolutely normal. Long overdue, in fact.

I'm actually glad to see the volatility because it means the markets are working normally. A little give and take is absolutely essential when it comes to bigger gains and better returns.

Hard to stomach with everything that's going on? Yup…which is why It's worth noting that the markets have posted positive second half gains 26 of 26 times since WWII when the S&P 500 has turned in positive January and February returns. Those aren't bad odds.

So now on with the show…what is the biggest mistake you can make right now?

Let me put it this way – it's something locked in our brains. And it loses investors more money than every other investment "problem" combined. Let me show you something:

The probability of correctly timing the stock market just 50% of the time is a mere:


Jamie Dimon has higher odds of being the next Fed Chairman.

Why are we so incredibly bad at something that seems so basic? Like I said, it's a "brain thing." Let me explain…

The Volatile Mind

You hear a lot about the term volatility when the markets jump like this. But most people don't really understand what it means. Volatility is simply a measure of the variation in price of any financial instrument over time. Unfortunately, the news has preconditioned investors to understand it as a negative influence because volatility rises when the markets drop.

In fact, quite the opposite is true. Volatility is really an expression of both up and down market movement. The key is in learning how to manage it so that your portfolio is not disproportionately impacted by either big down days or lost opportunity that comes from massive upswings.

Take the DOW, for instance. Over the past 110 years we've experienced two World Wars, multiple currency defaults, the Korean Conflict, Vietnam, the Gulf Wars, terrorism, presidential assassination, inflation, deflation, the Financial Crisis…and the index still rose 35,174%.

Investing and Market Volatility

The markets have endured plenty of "volatility" over the years. In fact, if you look far enough back, you find that the markets actually do a pretty good job under conditions that should have killed them.

What makes short-term volatility so dangerous is the impact it has on your mind and specifically on your decision making.

I've written about this before but it bears repeating:Investors systematically deviate from otherwise rational decision making when the markets drop.

Scientists think this is because of decisions that get made under duress when the primary concern is losing money are made using reactionary segments of the brain rather than those that are anticipatory.

Whether Bernanke cuts QE has nothing to do with it. He and his central banking buddies are sideshow inputs at best. So is the notion of a Chinese credit crunch, a European meltdown or any of half a dozen other things investors are worried about at the moment.

The Good the Bad and…

That's both good news and bad news.

Bad news first…

Join the conversation. Click here to jump to comments…

About the Author

Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at

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  1. ALAN KUSA | July 2, 2013


  2. Paul G Huber, CPA | July 2, 2013


    I'm pretty good at staying calm. I stayed calm as World Com sank all the way to zero. I started investing at age 14 and WorldCom was my one bad year. Never the less you are correct, I waited out the 2008-9 Obozo crash and a few other serious drops, but it's hard and I still get the Oggie-boggies. Like the buzzard sitting on the fence who says "Patience, Hell, I wanna kill something".

    I'm in precious metals with both feet. I been in big since 911. 10% ain't nothing and with the present sale I'm still picking up some quality stuff. This is like a sale at Kohls with a 30% coupon. Long ago Forbes (Malcom) wrote an article about buying penny stocks: buy a bunch of them and if a few perform you will make money.

    How about writing an article about investing in Pot? You remember, that stuff we toked in Nam and College back in the 60s & 70s? Somebodies gonna make some money as more and more states legalize it for the Tax Revenue.

    To get to another point you made, about the $80 billion leaving bonds and more will leave soon if they read their quarterly statement. That 80 billion is gonna go somewhere, and to poor old unsophisticated me, it looks like it went into Gold.

    By the way, I completely lack any trust what-so-ever of our present Government or the Media.

    So here's what I'm doing the next few days. I'm signing up with Morning Star and going thru my whole portfolio. I'm looking for companies that will perform in the piss poor future I see. I do love my Precious Metals, but I've found some ETFs that short Treasuries, oops that's right, you told me about them. Well I'm gonna get some before it all hits the fan. Then I still like food & water companies, but I am dumping any stock that doesn't pay some kind of dividend. Maybe you told me about CVS, I bought it the other week and I am up. I'm keeping that and maybe I'll buy some WAG which I been watching. I'm a Boomer and I see my friends doing Rx Drugs like crazy. I don't do any Rx.

    Guns seem like a really good investment. I may have to go buy a few more guns as well, I'm looking at a nice Mossberg 930 Semi Auto 12 Ga. My tag for on line comments is 'Guns & Gold". The NSA, CIA and FBI probably have me on there list.

    But back to news letters: I'm gonna drop a few to pay for Morning Star. I'm dumping the extreme right NLs that tout Gold and coincidently will sell you some generic Gold or Silver tokens that have no numismatic value at all. I'm keeping Money Map and Stephen Leeb's Complete Investor. All the rest must go and it will make my mailman happy.

    I've had a good year and nothing but short and Long Term gains so I will be culling out my losers particularly the shorts cause I hate paying anything to the criminals that run our Government.

    Thanks for listening. I just have to vent now and then. I did good, and not one cuss word!

    And in June you Touted AVG. I used AVG Premium for a while and a virus got thru. I use Eset E-nod 32. 3 years now and no bad virus. AVG does not pay a dividend. so we disagree on AVG. And it is my belief that Symantec is another dog. I used Symantec thru the 1990s, had some problems and I'm no fan!

    And one last thing. I'm semi retired. I sold my CPA Business and now I am at home employee for one client that wouldn't let me quit. They pay me well to work in my pajamas. I'm a 30% DAV from Nam. Next month my SS starts. Want to buy my office building? All this money they are throwing at me, I just keep shoveling out so I need your best ideas. I'm waiting out Freeport (FCX) I'm under water but may double down.

    You should look at Mueller Water (MWA) I've been buying this from $13 down to $2 and back to $7 where it sits now and I am now to the good, and I have the proverbial shit load. Scary, yea but what the heck? It beats the AC Casinos!

    Life is good! Obozo sucks!

  3. Warren Frank | July 15, 2013

    I Just became a member last week, and I never done an ything with the stock markets, before
    Can I find out more about the super dividends.
    And how do I buy the stocks or dividends?


  4. amalia | July 16, 2013

    Hi I started to trade binary options with special app that copy trades from professional traders to my account . I don’t have time to trade or experience as I work in other job and in the past few weeks it works well. I started with 500$ and it makes me 25-50$ a day so you should check it out : Hope I can help

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