by Gordon Pape
Survey shows share ownership down, but perhaps for the wrong reasons.
Last month, The Toronto Stock Exchange issued a survey that shows that share ownership is declining and that a growing number of people (42 per cent) say they will not be investing any money in stocks over the next three years.
Given the fact we're well into the second year of a bear market and still going strong, any other results would have immediately prompted accusations that the TSX had fiddled the books. What else do you expect people to say? That they're all excited about getting into the stock market and are planning to invest every penny they have? Of course not.
Perceptions of the stock market are shaped by current events. In the late '90s, when markets were booming, many more people owned stocks and a high percentage of those surveyed said they planned to buy. Two or three years from now, we may see the same kind of results again.
Of course, that kind of thinking is exactly why many people lose money in the stock market. Recently, I received a little booklet from the folks at Franklin Templeton mutual funds. It contained a number of wise quotes about money and investing from the company founder, Sir John Templeton. Here's one I thought was especially appropriate to the times we are experiencing.
"People are always asking me where the outlook is good, but that's the wrong question. The right question is, 'Where is the outlook more miserable?'".
That, of course, is where to look for stocks to buy.
There are basically three ways to deal with today's stock markets.
One - Sit on your hands. Ignore the hubris, keep your money in cash, and wait.
Two - Trade actively. When stock market charts look like mountain ranges, it's a signal that investors can make good money by buying on the dips and selling on the rises. But it takes mental toughness, strong discipline, and a major time commitment. You have to be watching the prices of your stocks on an hourly basis. A breaking news story can turn everything around within minutes.
Three - Invest for the long term. Don't worry about daily or weekly market movements. Keep looking for companies you want to own, trading at prices you're willing to pay. As you find them, add them to your portfolio and move on. That's the basic approach I take. Although I will actively trade at times, my main objective is to pinpoint good stocks that I believe have strong potential for appreciation over time. It's a proven formula for investing success, and one in which I continue to believe.
The article originally appeared in an August issue of the Internet Wealth Builder, a weekly e-mail newsletter that provides financial advice on a wide range of topics. For more information about becoming an Internet Wealth Builder member, Click Here