Sunday Musings: Wall Street

While I am not much of a movie buff, my wife and I did go out last week and saw “Wall Street.” I like actor Michael Douglas and, as anticipated, he played his role to perfection.

While the story line was well done, personally I was hoping for a little more insight about the 2008 market crash. Details never emerged, but the failing and surviving brokerage companies were clearly recognizable.

The speech that Gordon Gekko (Michael Douglas) gave in front of a graduating class was right on the money including his reference to the students being from then NINJA generation. No Income, No Job and No Assets. Sad but true.

MarketWatch featured an article about the movie in “Wall Street the movie frightens Main Street.” Not much struck my cord in it, except the final paragraph:

Greed is good, and so is fear. Investors who keep both in moderation — and have a strategy that doesn’t give in to either of those two extremes — will find out that while their money never sleeps, it doesn’t have to beat everyone else to win the game.

The movie gives a wrong impression in that viewers may assume that money can only be made by taking huge risks and taking advantage of everybody else in the process. That maybe true for those who consider a $50 million profit not worth the effort, but it represents only a small portion of those caught up in reckless greed.

On the other hand, even average mom and pop investors have now leveraged ETFs available, which they can buy and sell at push of a button to satisfy their need for enhanced profits, which easily can turn into enhanced losses.

Balancing the ever present internal forces of greed and fear is truly an art form. The old Wall Street adage “bulls make money, bears make money, but pigs get slaughtered” still holds as true as ever.

Not making emotional decisions, staying with the long term trend, not getting too overexposed and above all, only invest after determining your risk tolerance (to avoid sleepless nights), are some of the basic fundamentals that will make investing a lot less stressful.

When you combine these simple ideas with a solid exit strategy, that will keep your portfolio from getting a serious haircut, you will come out ahead in the long term and should have no reason to worry about dealing with the vagaries of Wall Street. Having such a plan in place, even though it may not be perfect, is far better than having no plan at all.

About Ulli Niemann

Ulli Niemann is the publisher of "The ETF Bully" and is a Registered Investment Advisor. Learn more
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