Taking Stock by Jim Stovall

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I have written more than 50 books and well over a thousand of these syndicated columns that appear in newspapers, magazines, and online publications around the world. Every book and each column, including the one you’re reading now, has my contact information. You can imagine how many calls and email inquiries I receive. People often have questions about business, careers, relationships, education, and success, but the most frequent topic my readers want to focus on seems to be personal finance and investments. 

Inevitably, any discussion involving long-term investing touches upon the stock market. Most investors know, and financial experts agree, that long-term, the stock market is an investment worthy of consideration. While I have always believed in and profited from the stock market, please remember that it may not be wise to invest money in equities or common stock if you need those funds within the next five years. The vast majority of five-year periods throughout the stock market’s history have been favorable. However, if you’re investing for a year, a month, or a day, it can be very volatile and risky. Overall, I know that the weather will be generally hot in August, but if I’m betting on one specific day, it’s impossible to predict. 

United States Secretary of Defense Donald Rumsfeld once said, “There are unknown unknowns, there are known unknowns, and there are known knowns.” This philosophy is not only true in geopolitical matters but can help explain the stock market. 

When we think of unknown unknowns, we refer to things like pandemics, civil unrest, earthquakes, and other unpredictable external factors. While these events certainly impact the stock market since they are not predictable, we can only address them by staying invested for the long term and allowing the market to recover. 

When we think of known unknowns, they involve recessions, political campaigns, and seasonal marketplace events. We know that there is generally a year-end rally in the stock market, and the retail sector does well during the holiday season. If we invest for a five- or ten-year period, these factors become a non-event. 

When we think of known knowns, we generally refer to things we control, such as the approximate date we want to retire, when our kids will be going to college, how much we invest, and other predictable life events. If we think of the stock market as a small child climbing a set of stairs while playing with a yo-yo, we will have a powerful visual reminder. If we focus on the yo-yo, we will likely be nervous and stressed. But if we remain focused on the child as they slowly climb up the stairs, we will feel positive about our financial future. 

As you go through your day today, focus on what you know and stop worrying about the unknowable. 

Today’s the day! 

Jim Stovall is the president of Narrative Television Network as well as a published author of many books. He is also a columnist and motivational speaker. Follow him on Twitter (@stovallauthor) or Facebook (@jimstovallauthor). His latest book, coauthored with Greg S. Reid, is Passport to Success: Experience Next Level Living, now available wherever books are sold.