The Practical Economist

COMMENTARY - June 26, 2017

Your Financial Custodianship - What Kind of Hoarder Are You?

Don't you get frightened at times by the facile understanding that people have with regard to the economy.

It's embarrassing when you hear them say it: they equate the economy with the stock market and...if they hear that the stock market is continuing to climb, they think that they're some kind of genius.

Listening to the "pretend" business reports doesn't make you a custodian of your money.

Paying attention to the indicators that come out in advance of them being reported widely in consumer venues and at least in conjunction with listening to how your stocks are doing, does begin to make you a custodian.

Look: there's absolutely nothing wrong with spending a heck of a lot of time on developing a template that's right for you and then practicing benign neglect for most of the time.  The point there is that if you developed your algorithm properly, you've already incorporated those ups and downs into your outcome.

But, Heavens to Betsy! Hearing that your stocks went up doesn't make you a custodian  Not listening to stock reports when the market is crumbling (because it makes you feel like a loser to listen).  And, most of all, equating the stock market with the economy doesn't put you on the path to being a smart custodian, either.

Of course we could take for several minutes about why they're different, but very fundamentally: if you don't know how to differentiate the two, we guarantee you that you will miss knowing when the market has hit an unsustainable high and when the market has hit an unsustainable low.  In other words, we'll be that you miss opportunities and hoard threats.