For as long as I can remember, I have worked under the premise that if something does not make me happy, make me better or make me money, I have no time for it.
When I became a financial advisor in 1985, I thought I had the stock market figured out. Instead of taking a long-term perspective of my stock portfolio, I thought to try to buy low and sell high was a better investment approach. Although a few folks who were/are a lot smarter than me tried to convince me that trading the stock market is a fool’s game, I did not heed their words of wisdom. Instead, I undertook this silly trading endeavor that, in the end, did not make me happy, did not make me better and certainly did not make me money!
Please know that on most days, I prefer to be a wise man instead of a wise guy. Regrettably, today is not one of those days, as I will, at my peril, follow the advice from British novelist Kingsley Amis, who said, “If you can’t annoy somebody, there is little point in writing.” Away we go.
Why does just about everything I hear about someone who suggests they can time the stock market make me want to paint myself with honey and jump into a nest of fire ants? I get incredibly, indescribably and excruciatingly nauseated when I think about the countless investors who panic and run to cash to avoid a stock market correction.They do not understand that the key to making money in stocks is not to get scared out of them! The truth of the matter is that one cannot win in the investment game unless he/she has the emotional fortitude to get in it and stay in it for the long-term.
So, why do so many folks insist on trying to avoid a stock market downturn by dumping stocks and going to cash and thinking they are bright enough to get back in at a lower price? Let’s call it for what it is: Fear got them, hook, line and sinker! These market-timing fools suggest the pain of staying invested in stocks is just too great, as they could lose more money, albeit on paper. Therefore, they flock to a perceived safe haven: cash, with the intentions of getting back in stocks when the clouds clear and everything is hunky-dory again. Oh my, amigo! Right now, I am uttering John McEnroe’s famous meltdown quote: “You can’t be serious!” Your game plan might be a comforting fallacy, but it ain’t reality, my friend. Nobody rings the bell to say it is safe to get back in the water.
I suggest we need to know a few things to invest in, and then we need to let our money grow for 30 years. But that’s not sexy, is it? Instead, we watch shows with talking heads who make endless predictions about the economy and this year’s hottest stock without ever being held accountable for their picks, which are often wrong. We do not need gypsies with crystal balls, soothsayers wearing wizard hats, palm readers and stock market pundits with sketchy records of accomplishment.
Now that I got that off my chest, let’s have a little fun. I came across an entertaining website that tests our stock market trading shrewdness. If you have access to a computer, I encourage you to try the interactive game. Google the following: “How foolish it is to sell stocks right now?” The basis of the game is straightforward. The site selects a random 10-year history of the stock market (S&P 500) and provides you the opportunity to see if you can pick the best time to sell stocks to avoid the inevitable correction. The game begins with a hypothetical $10,000 investment. As the chart progresses through the 10-year period, you will have just one chance to sell and one opportunity to buy back. Said differently, when you think you should take your money out of the market, hit “Sell.” When you want to get back in, hit “Buy.” The computer will analyze your results within seconds.
For you stock traders who found the courage to read my entire narrative and perhaps partake in the interactive computer game, I apologize if I offended you. I am, as it was never my intention. Nevertheless, my position is etched in stone. You can quit rolling your eyes now and turn the page for perhaps a more enjoyable read.