Watching the market is fun but don't get too carried away.
Last year, we were all celebrating the stock market's storming recovery from its lows in early March.
Right now, we are bemoaning its recent painful retreat, watching last year's gains dwindle and debating whether now is a great time to pick up shares on the cheap, or a lousy time to buy into the next dip.
Those who watch the market like a hawk will have perked up on Tuesday, when the FTSE 100 enjoyed its biggest one-day advance in five weeks. They will be feeling down in the dumps once more today, after markets quickly relinquished half those gains.
It's a bit like being a spectator at a football match. One moment your team is ahead, the next it's behind. Then it suddenly pulls a goal back, and there is everything to play for.
But don't treat share price ups and downs as anything more than that, because the short-term ebb and flow is mostly meaningless (and if observed too closely, injurious to the health).
Virtual reality
The crash in 2008 was agony to watch, but so far, it hasn't made a jot of difference to the quality of my life. Yes, my pension and investors were suddenly worth a whole lot less, but since I wasn't drawing any capital or income from them, and don't plan to do so for the next 20 years, it didn't really matter.
It's a bit like somebody telling you it is raining in Cornwall this week, when your holiday is booked for the end of August. It doesn't affect your plans.
Things are different if you are an active trader, when market volatility gives you amazing opportunities to make (and lose) oodles of cash. But if your money is just sitting there, biding its time until you finally convert it into capital and income, then recent pains and gains are purely virtual, a vicarious rollercoaster ride.
Provided, that is, markets have recovered by the time you cash in your investments to boost your income in retirement. Which in my case, should be around 2031.
The long and short of it
This can only be a good thing. If every time the stock market fell, say, 10%, you had 10% less to spend on your mortgage, down the shops, or on your family holiday, then only the very rich could afford to invest.
It's the very fact that we hold our money in the stock market for the long-term that makes short-term volatility possible to bear.
Daily stock market movements do matter are when you are putting money into the market, or taking it out. And even then, that only applies if you are making lump sum investments. If you're canny, you can use share price shifts to your advantage, buying on the dips and selling on the peaks. As Bruce Jackson argues in A Whole Lotta Bull, short-term volatility can be your friend.
But it is still the long-term picture that really matters.
With one exception...
There is one point where stock market swings really do matter, and can cause a lot of pain to private investors. That is in the run-up to retirement.
If you plan to end your rollercoaster stock market ride by tipping your pot into an annuity, it makes a big difference whether you are doing so at the market peak or trough.
Luckily, there is a clear strategy for dealing with this, such as gradually edging out of equities and into less turbulent investments such as bonds and cash as the big day approaches. Alternatively, you could keep most of your pot invested in the market even after you retire, only drawing income when it suits you. That's if your pot is big enough.
Noise annoys
With that single exception, short-term market movements rarely have long-term consequences for your wealth. That's why you have to tune out the daily noise, because it's the big picture that really matters.
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