Beware of Chicken Little in the Stock Market
by Sidney J. Ruth, CPA, CFP®

“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful”
– Warren Buffet, Distinguished Investor, Chairman, Berkshire Hathaway

The past few weeks and months have certainly demonstrated the risk and volatility associated with the stock market. At times, we get lulled into thinking that the stock market only goes in one direction – up. When economic disruptions do occur, it is hard not to read the newspaper, watch the talking heads on television and come to the conclusion that the sky is falling. Investors in the stock market will always find a reason to worry, whether it is the impending issues with sub-prime loans and the real estate market in today’s news, the internet bubble of the 90s, the stock market crash of 1987, or the oil embargo of the 70s.

Falling Acorns on Wall Street
Most of us know the story of Chicken Little. Chicken Little thought the sky was falling. With every acorn that fell on her head, it was a sign that the whole sky was crashing down. The sky never fell and Chicken Little just had to get used to the fact that acorns might fall on her head every time she walked in the forest.

The idea that the sky is falling with the dropping of an acorn may sound absurd, but this is exactly what happens regularly in the stock market. At every hint of bad news, the acorn, people yell “The sky is falling!” and run out of the forest, the stock market. Many of us listen even if we don’t think the sky is falling, as it seems too big a risk not to follow the herd. That very mistake, running from the market every time an acorn falls, is what hinders many of us from achieving our financial goals.

Without a doubt, we are currently hearing a lot of “Chicken Little’s” in today’s market. How can we avoid following the pack and running from the forest? First and foremost, it is imperative that we avoid any short-term reactions and keep focusing on our longterm goals. In focusing on our long-term goals, it is crucial that you and your advisor diligently monitor your investment portfolio to ensure it reflects the time horizon and risk tolerance necessary to achieve your future goals. Don’t hesitate to call an FIFS advisor at 267-384-5300 to make sure your portfolio is properly structured to withstand the falling acorns which are sure to occur in the stock market forest.

Investment advisor representative of Investment Advisors, a registered investment advisor and a division of ProEquities, Inc.
Securities offered through ProEquities, Inc., a registered broker-dealer. Member FINRA and SIPC.
Franconia Insurance & Financial Services is independent from ProEquities, Inc.

FIFS Connection, Fall 2007, Vol.4, No. 4

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