Time to be a Boglehead?

 

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.