Most stock-market participants have no idea how markets work and how prices are set.

I was reminded of this when two headlines came through my inbox in the same hour:

“Senate Majority Leader – Harry Reid says there is little progress in fiscal cliff talks.  Stocks move a leg lower.”

and

“Jay Carney denies that fiscal cliff talks have broken down.”

Which one do we believe?  Should we do anything with our investments as a result?

The news machine is conditioned to find a way to connect news to your heart beat. If they can increase or decrease your heart rate then they have succeeded. By the way, they get more points for increasing it.

So, how better to get at your heart rate than through your wallet? And how better to do that than through the market?

“Fiscal Cliff is coming. Stocks are down.” They want to make you nervous. Nervous people keep watching, keep clicking to new pages, keep, keep, keep, being nervous.

Most main-street participants in the stock market have no idea how markets work. They have no idea that supply and demand set market prices, and they certainly have no idea how to put a portfolio together based on this reality so that different asset classes work with each other to bring you less volatility through the years while giving you market returns in the end.

Do not fall for this kind of news. Many investors will look to make changes after enough of these kinds of message have hit home. Don’t be one of the many.

Markets set prices based on billions of factors. My clients own 13,000 companies in 44 countries in 18 separate asset classes. Downs have always come back. Markets have always gone up. Stay the course.

Call me if you want to talk.

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