Market Volatility — Is It Different this Time?

Last week, the market staged its third-largest weekly gain since World War II.  What’s up with market volatility?  Are we still in a bear market?  Are we in a bull market? Sometimes it feels like we are at the circus, doesn’t it?

From 1929 through 1933, the DOW moved up or down by 20% or more no fewer than 12 times!  Last week could just be another head fake.  Of course I’m delighted that the market staged a healthy bounce, and I hope it continues.  But I’m not convinced that it’s time to throw caution to the wind just yet.

So what can you conclude by recent stock market action?  Not much.  At this point, I believe it’s more valuable to revisit your investment objectives and remain focused on the next 10 years — even if you are currently interested in withdrawal strategies from your accounts.  Whatever is going to happen in the market over the next two months or two years is unknowable.  Don’t even try to guess.

HOMEWORK

I’ve come across some fantastic articles over the week and I’d like to share them with you.

First, over at Oblivious Investor I found a great article that explains why the market is unpredictable.  A great reminder.

David, over at Moneyning, wrote a very interesting piece on David Back and the Latte Factor.  I like this one because he discusses the real way to become rich. (Hint — it has nothing to do with coffee.)

MyTwoDollars.com had a nice idea — take a vacation for free by trading homes.  He goes into the details and I think it’s well worth the read.

FrugalDad.com wrote a wonderful piece on complacency and its negative impact on our financial future.  I loved this one.

And for all the engineers, Moolanomy featured a nice post on market correlation and diversification.  (No offense…some of my closest friends are engineers.)

Wishing you a wonderful weekend.   But I will be giving you a pop quiz on Monday so make sure you do your reading!