Foregoing links this week and giving some thoughts….
Facebook, Amazon, Apple, Netflix, and Google (now Alphabet) felt the brunt of the big drawdown this week. They lost over $175 Billion on Wednesday alone. Let’s think about this for a moment. These are five of the largest, best-performing tech stocks in the world.
Where did the money go? What did people who pulled out of these stocks do with their cash?
They likely moved it to cash to wait.
Wait for what? Wait to get back in. These are the speculators, computer algorithms and the un-disciplined. They looked “smart” on Thursday when the selling continued. They may look smart for weeks to come but you better believe they will be sweating trying to figure out when to get back in.
Who needs that stress? People who make a living day trading. People who need higher than average returns to pay their mortgage. People who are so far off track for retirement they are throwing hail mary passes in the hopes of being able to retire like their neighbor who stuck with a proven strategy.
If you are mostly in index based funds you don’t have this stress. The fund will hold these stocks today, tomorrow and in the months to come. You don’t have to worry that a fund manager or their algorithms are trying to time the buying and selling of these stocks.
This is a little tongue-and-cheek. Of course you care but I hope you get what I am saying. Remember the type of investor you have been and will continue to be. Even if it stresses you out try to remember you’re strategy is meant to eliminate emotion, decrease stress and perform over the long term.
And, if this is the next inevitable market downturn then guess what? You are prepared and that’s all you can do. Take solace in the fact that even though it hasn’t been the norm for a while, market corrections and bear markets are quite normal. Its what makes the whole thing work. If the market didn’t have drawdowns then it couldn’t have run-ups and set all-time highs either.