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DON’T DO DUMB: Charts Don't Matter when Investing for Retirement

December 07, 2023

Stock market charts are a popular tool among investors, but they are not essential for making successful investment decisions. In fact, some experts argue that charts can be misleading and counterproductive.

Why charts don't matter in investing for retirement:

  • Charts are based on past performance, which is not a guarantee of future results. The stock market is notoriously unpredictable. Investors who rely too heavily on charts may be tempted to buy stocks that are already overvalued, or to sell stocks that are undervalued.
  • Charts can be easily manipulated. There are a number of technical indicators and chart patterns that investors use to make trading decisions. However, these are not always reliable, and can be easily manipulated by experienced traders.
  • Charts don't consider fundamental factors. The stock market is driven by a variety of factors, including economic conditions, company earnings, and investor sentiment. Charts don't provide any information about these other factors.
  • Charts can lead to emotional trading. Investors who rely on charts may be more likely to make impulsive trading decisions based on their emotions, such as fear or greed. 

Instead of relying on charts, investors should focus on the following:

  • Invest for the long term. The stock market is volatile in the short term, but it has historically trended upwards over time.
  • Invest in high-quality companies. Look for companies with strong financials, good management teams, and competitive advantages.
  • Diversify your portfolio. Spread your money across a variety of different asset classes and sectors.
  • Rebalance your portfolio regularly. Over time, your portfolio may become unbalanced as some investments outperform others. Rebalance your portfolio regularly to ensure that it remains aligned with your investment goals and risk tolerance.

Stock market charts can be a useful tool for experienced traders, but they are not essential for making successful investment decisions. Investors should focus on investing for the long term in high-quality companies and diversifying their portfolios.