November 2023
“Love is the only force capable of transforming an enemy into a friend.” -Martin Luther King, Jr.
Over a long-term time horizon, it would have been almost impossible to own high quality US stocks and not make money. Yet I always run into people who “know someone” who lost money in the markets. Often this happens when people sell out, usually near a bottom. Why would anyone sell at the bottom? It doesn’t make any sense. Well mostly they just cannot take the pain any longer. Investors, left to their own devices, cringe and ache and just “can’t take it anymore,” and so they sell. They capitulate. They give in to their emotions, disguised and rationalized as logic, and they sell. This is how they make one of the most obvious and painful of the Eight Great Investing Mistakes. This is how it happens.
On a normal day, when talking with investors in a non-emotional, normal conversation, we can all agree that buying high and selling low is a bad strategy. Why then do so many smart people continue to make that same mistake? Human beings, emotional by nature, are terrible investors. Despite logic and statistics, they continue to do the wrong thing at the wrong time, because it hurts so much emotionally. Fear comes in and ties knots in their guts. At some point, in spite of promises not to, they sell.
This is where we come in. Note that above I mentioned investors “left to their own devices.” We don’t let this happen to our clients; we don’t leave them to their own devices. Sometimes not doing anything maybe the smart investment thing to do. Often in markets like these, the most valuable thing you can do is avoid making the Eight Great Mistakes and stick with your plan no matter how much your gut is screaming at you. We say that any one of the Eight Great Mistakes could potentially cost you 30-50% of your nest egg.
Think about an investor with a million-dollar portfolio. In the midst of a bear market, they are down 30%. They can’t take it anymore, so they sell. Now they have locked in a loss of 1/3 of their assets. Invariably this happens near the lows of the market. That is usually when the pain and fear are most unbearable. Quickly the market starts to rebound, and before they can finish licking their wounds the market is up 10%, and then 15%. Some of the biggest moves in the market happen near bottoms.
Well by golly, they don’t want to make the mistake of buying high after they just sold low, so they wait for the market to come back down. Unfortunately for them the market is up 20% (Murphy’s law and all that), and it just keeps going on without them.
We have seen this play out in the past, and typically it is not a pretty sight. This is why we believe it is valuable to work with an experienced financial advisor that can hold your hand through these times. Hang in there. This too shall pass. Call us and let’s talk about it. This is a difficult market. We are here for you.
As Thanksgiving approaches, one of the things I am most grateful for is our clients and friends (they are the same) who have experienced this. We especially love you, our clients, and that you allow us to be such an important part of your lives. Thank you for letting us be a part of your life, your family, and your future.
Sincerely,
Brien Krank
Financial Advisor, RJFS
Senior Portfolio Manager
Managing Partner – Collins and Krank
Hear me on the radio Wednesday mornings from 7:35 am to 8:55 am on 1100am The Flag and 970 WDAY.
Any opinions are those of Brien Krank and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is not guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance does not guarantee future results. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Individual investor’s results will vary. Raymond James is not affiliated with Nick Murray, Federated Hermes, or First Trust.