Jazzi Young's avatar
$10.3m follower assets
These Articles are So Tiring ...
In the midst of every bear market, financial publications seem to roll out these types of articles like clockwork. Here are the key fragments from the article:

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If you're a retail investor, reading these types of articles quickly gets old because it's simply NOT HOW INVESTING LIFE IS LIVED.
Few receive a massive lump sum of money, have the misfortune of investing all of it at the very peak of the market ... and then have no money to invest after that.
The vast majority of us have jobs, diligently spend less than we earn, and invest the savings.
This means we invest over time. Sometimes we happen to invest at the peak of the market, sometimes at the trough.

One of the conclusions of the article is "the long term doesn’t always work out". The long-term is sure as hell more likely to work out better for us than the short-term. The short-term is a crap-shoot because we're battling market noise and volatility. The long-term nullifies that.

Here's another statement intended to be a gotcha: "Far from being unique, the Nasdaq’s disappointing return over the past 23 years serves as a powerful reminder that the stock market doesn’t always go up". The only thing a retail investor should conclude from this statement is they had better get busy dollar cost averaging. You'll make good profits on the money you happen to invest at the trough of the cycle.

This might seem like a rage against author Mark Hulbert, but that's not my intention. We've heard Mark speak at the AAII Conference. His talk was excellent and he has a lot of good wisdom to impart. But every once in a while, he rolls out articles like this which aren't constructive at all to a retail investor.
It's a hit piece that presents a surface-level problem, and then fails to offer any solution or mitigating strategy.

Investors who read articles like this and find themselves hesitant to invest should heed the advice from legendary investor Peter Lynch:
"Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves"

If you're a wage and salary earner with a desire to achieve financial freedom, your best bet is to get busy investing.

Jazzi Young's avatar
Addendum: You don't have to listen to us. Listen to Professor Burton Malkiel, author of "A Random Walk Down Wall Street" who recently said:
"if you look at the period from 2000 to 2010. January, 2000 was about the peak of the .com bubble. The market went down sharply. The market was terrible during the first decade. It was often called the lost decade. But if you dollar cost averaged during that decade, just put your money in $100 a month and you reinvested all your dividends, you made almost 6% even in years when the market did nothing"
AverageInvestor's avatar
@jazziyoung message to investors - reinvest dividends. Compounding SO powerful!
Ian MacLean's avatar
I think he has a sound point. Timing markets is very important. The Nikkei going nowhere for 30 years is a great example.
Jazzi Young's avatar
@madbadetc 😆 Yes, the obligatory "Now do Japan". Well done Sir.
Ian MacLean's avatar
@jazziyoung well, it’s not just an outlier. There are parallels. And it’s quite plausible we face similar PA soon.

There’s also the need to account for monetary inflation. Are you sure all that appreciation is real? Does it really matter if your stocks appreciated if the cash you get for selling them has much less purchasing power?
Jazzi Young's avatar
@madbadetc Parallels maybe, and anything is possible in the future, but we've found predictions based on macros too unreliable to base investment decisions on. There are hundreds of concurrent input variables that determine the future direction of the economy and the markets, many of which aren't easily measurable.
Our simplistic thesis for why the stock market will continue to trend higher over the long term is based on microeconomic and behavioural factors:
  1. 40% of S&P 500 revenues are generated from outside the US, so this is still largely a global growth story.
  1. The growth runway for a vast number of listed companies remains intact and on aggregate, will continue to drive long-term stock market growth.
  1. It's likely that stocks will continue to be the best asset class to invest from a risk-return and after-inflation perspective. Stocks are a bet on the enterprising nature of entrepreneurs and innovators to discover and commercialise new industrials and find new avenues of growth.
  1. Humans are always looking to improve their station in life. The marketing profession to terrific at engineering needs out of wants, collapsing the tiers in Maslow's hierarchy of needs.
There's no guarantees we're right, but we've seen nothing to convince us there's a better transparent and liquid asset class to invest in long-term.
Benjamin Tan's avatar
All the more difficult to hold onto winners when confronted with articles like that for sure - as a financial planner once said to me, sometimes it is better not to look at the news or your portfolio value too regularly ! But still have to keep our antennas up. Contradictory but also true



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