The popular world view is short term and technology has only helped to shrink that view. That’s why being a contrarian to that perspective is a big advantage for investors. But should we pay attention to the short term?
The media has been circling like vultures for an opportunity like this since the last market correction in May 2011 because nothing draws eyeballs like high volatility and a correction.
Think about that. We’ve gone four years without the market falling at least 10%. You can get accustomed to that! And many investors did.
But had you paid attention and held on through Monday’s decline to today, your balance would be about the same. Had you slept all week, only to look at your balance today, you might think nothing much happened. (That’s not to say the worst is over or it’s only the beginning. No one knows what next week will bring.)
The juxtaposition of those two ideals – attentiveness or ignorance – gets argued every time the market falls. But which one, if there is one, is right?
As always it depends.
The loudest chorus pushes ignorance. Big names, like Bogle, recommend you set up automatic deposits, pick an allocation, and not look at your balance statements till you retire.
He has a point.
One bad decision can negate years of good decisions in a second. If you feel the need to act every time the market does something unexpected, you should do your best to ignore it.
That’s easier said than done.
The alternative is to take it all in with the hope of learning from it. You can read about it, or watch it from a distance, but nothing accelerates learning like first-hand experience.
And if you stick with it long enough, you’ll realize a few things like how the market works, that there’s always something worry about, and uncomfortable things happen once investors get comfortable.
The market goes through periods of calm and angst. You can’t have one without the other. “This too shall pass” is a recurring theme in that cycle.
Unrelated Sidenote
Berkshire Hathaway is selling the Berkshire Hathaway Inc.: Celebrating 50 Years of a Profitable Partnership on eBay. It was originally sold at the 2015 shareholder meeting. The book covers the history of the company before and after Buffett took over.
I picked up a copy and got this week direct from Kiewit Plaza.
Last Call
- 5 Things Investors Shouldn’t Do Now – J. Zweig
- What Happens Next? – M. Housel
- You Need a Plan, Not Predictions or Platitudes – Monevator
- How Emotion Hurts Stock Returns – The Upshot
- Crash Rules Everything Around Me – A Wealth of Common Sense
- Another Market Crisis? My Survival Manual/Journal! – Musings on Markets
- Some Good Things About Crashes – M. Levine
- A Chance to Clean Up Your Act – B. Ritholtz
- Rising Anxiety That Stocks Are Overpriced – R. Shiller
- Stock Market Lemmings (Daily Cartoon) – The New Yorker
