Friday File: A Time for Nibblers

By Travis Johnson, Stock Gumshoe, December 7, 2018

A fantastic market last week, a terrible market this week… it’s time, once again for another episode of “Turn Off CNBC and Have Some Perspective!”

I won’t go into a long screed about long-term investing here, but I thought I’d just share one of my favorite charts — I see someone post something like this on Twitter every now and again (not sure who created it), and this is a good week for it… this is the stock market since 1950, with little notations for many of the very rational and reasonable “reasons to sell” that have come up during those almost-70 years:

Some of those were huge declines, masked by the relentless march of time… and all of those declines felt awful, but you would have been hard pressed to sell during the early decline and buy back at the bottom with any consistency, and missing out on a few good days would have dramatically hurt your long term performance over those decades.

And, of course, we’re mostly stupid about balancing short term pain versus long term gain, and we feel best when we follow the herd, and we react emotionally to whatever the news of the day might be… we are, after all, human. Volatility has returned to the markets just when we were all planning on enjoying the good ol’ “Santa Clause Rally,” so we’re all supposed to place our bets about whether or not the market will go up from here — better yet, we’re supposed to go on CNBC and explain exactly why we’re sure that we can tell the future, and why we know that the trade war or the Mueller investigation or the next Federal Reserve 0.25% interest rate move or the Christmas shopping trends will make or break the market.

You won’t find much of that wisdom here, I’m afraid… all I can do is tell you that I think days when the stock market is falling and everyone’s worried that the “rally is over” are generally good times to nibble, if only to give you a little jolt of dopamine from taking action, and because buying will generally work out better in the long run than selling if the next 70 years are anything like the last 70.

Maybe they won’t be, I don’t know, maybe Warren Buffett’s adult lifetime has happened to coincide with the stock ...

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