- Will Halloween spook your investments? (click to display images)

Published: Sat, 10/16/21

Hi ,

September was a scary month, with the popular SPY - S&P 500 index ETF starting out at roughly $453 on September 2 and closing out the month at $429 for a 5.3% drop. During the month there was a lot of volatility.

But, if you're a long term investor, the ups and downs of your investment values shouldn't scare you. In the short term, the stock market is simply a voting machine, measuring differing bits of information and reacting, according to acclaimed value investor Benjamin Graham. Many believe that short term movements in investment markets are random!

Fortunately, over the long term, stock prices have increased as the underlying companies have grown and prospered.

Although there is a market anomaly labeled the October Effect. But, with the exception of Black Monday on October 19, 1987, it's largely a myth that stocks typically decline in October. Despite the Black Monday drop of 22.6%, you'd need to travel back to October1929 to uncover consistent October stock market crashes.

Yet, financial asset values are volatile, and do peak and fall. And, the Shiller PE ratio, a stock or index valuation measure that considers the current price and divides it by the average inflation-adjusted earnings from the previous 10 years is hovering at 37.63. THat's in contrast with the average ratio of 16.85.

This suggests that stock prices may be overvalued.

But, we still don't know when the next 10% to 20% or more decline will occur.

If you're seeking to make sense of the cyclical nature of the markets, check out our recently updated article:

How To Benefit From Cyclical Investment Markets

And, if you're worried about inflation, then you might appreciate this article:

How To Prepare For Inflation

Write in and let me know what you're investing in now. I love to hear from you and read every email.

Happy investing, and remember to spend your time on what matters!

Best regards,

Barbara

Barbara A. Friedberg, MBA, MS

P.S. If your portfolio could use some organization, check out the free Personal Capital Investment Management platform. You get retirement planning, net worth, income, and expense tracking. And, so much more. Just link your accounts for easy access.

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