Investors
are fearful of continued interest rate hikes by the Federal Reserve; the stock
market goes down.
Investors
are heartened by the Christmas season sales figures from retailers; the stock
market goes up.
Investors
worry over falling prices for housing; the stock market goes back down.
Energy
companies are poised for a big comeback as oil prices rise; the stock market is
back up.
But
the Fed chairman said he’s concerned over the tight labor market; the stock
market is down again.
The
back and forth of good news-bad news in the investment world is nothing new—nor
is the accompanying swing in investor sentiment and behavior. But for some reason, as this new year begins,
to me it just seems more extreme. The dips and the leaps seem bigger, the
investor reactions more irrational.
Maybe
this is a good time to reflect on the Bogleheads. That is the nickname given to the disciples
of the late Jack Bogle, founder of Vanguard and pioneer and early proponent of investing
in low-cost index mutual funds. He also
preached a passive disregard of the vagaries of stock market ups and downs and urged people
to essentially buy and hold stocks/mutual funds for the long-term.
Kiplinger
magazine recently reported on a Bogleheads convention near Chicago. As chance would have it, they convened on one
of the most volatile days ever in the stock market, October 13, 2022, when the
Dow Jones Industrial Average plunged 500+ points. The Bogleheads gave a raucous cheer when one
of the speakers quoted Jack Bogle: “Don’t just do something, stand there!”
And
that they did. As Kiplinger reported,
they “calmly noshed on oatmeal and Danish” while, “as a group [they were] losing
tens of millions of dollars” in the stock market decline that day.
But
guess what? By the end of that day the
stock market had done a complete turnaround and ended up over 800 points. And by time the conference adjourned a couple
of days later, the market had returned to where it was before the conference
began. A lot of sound and fury for
nothing, basically.
Perhaps
we should all take a lesson from this. Turn
off the TV talking heads. Pay only
passing attention to financial news. Give your heart and stomach a break. Pick your investments, perhaps tweak and
rebalance them a couple of times a year, but just stay the course and don’t
worry so much. Historically, the market
has an impressive record of gains over longer periods of time. Let that
patient style of investing carry you to better investment returns, and resolve
in 2023 that you will not jump into the life raft every time someone says “iceberg”.
Until
next time,
Roger
“Whoever
watches the wind will not plant; whoever looks at the clouds will not reap.” Ecclesiastes 11:4 NIV*
*Scripture quotations taken from the Holy Bible, New
International Version® NIV® Copyright © 1973, 1978, 1984, 2011 by Biblica,
Inc.™ Used by permission. All rights reserved worldwide.
