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Being a human being and a long term investor is ….. challenging.
I think we all probably know the accepted wisdom. Timing the market is almost impossible. Trading is a fool’s errand. Long term investing is the only way to reliably build wealth. The key is to determine your plan, set your allocations then stick to it.
But because we, as the HD community, take an interest in personal finance, we are also likely exposed to financial media. I regularly listen to the “Animal Spirits” podcast and hold Ben Carlson and Michael Batnick in high regard. But recent articles and podcasts from Ben Carlson include:
Animal Spirits: It Feels Like 1999
Is This the Top?
Animal Spirits: Did the Market Just Top?
The Animal Spirits podcast has also had a constant drumbeat of “AI bubble”, which will inevitably work to undermine the confidence of investors.
I’m sure that if Carlson was asked directly, he would say that we should invest for the long term and not try to time the market. Yet the financial media landscape requires that the drama of today must be examined in great detail, and the pundits need to speculate about what the future might hold.
Personally, I feel lucky that I have truly embraced the notion of long term investing. I’m interested in the daily business news, but I feel no urge to race out and move money around based upon Nvidia’s latest quarterly earning report.
But I get it – the overwhelming tsunami of financial drama can make being a long term investor very, very challenging. As human beings we feel like if things are going bad, or might be going bad in the near future, that we should be doing something. Doing nothing can feel lazy, apathetic, neglectful.
I’ve got no answers for how to be a long term investor in the modern world. But perhaps stepping back from the daily financial chatter and reminding ourselves of our long term aims can help bring a little respite from the noise.
Greenspan was absolutely correct when he used the term “irrational exuberance” in 1996. Of course, it was another 4 years before the bubble burst….
“Yet the financial media landscape requires that the drama of today must be examined in great detail”
I love that just about every weekday evening when reporting on the markets they always have to come up with a reason for the rise or fall that day. I will admit that on occasion there can be reasons for significant changes, especially this year, but the majority of times it just the normal fluctuations of the markets.
I read Ben’s newsletter e-mail most days. I have noticed lately he uses the dramatic headlines regarding AI Bubble, is this the top of the market etc. I assume these headlines are click bait and help draw a larger audience? However, the underlying message in his articles is usually to stay the course, dollar cost average, you can’t time the market. He is also in his early 40’s and I think generally his perspective is wise beyond his years but at the same time also that of someone in their 40’s. No harm in that, but sequence of return risks do not get mentioned very much.
That being said, in conjunction with the AI Bubble theme in various articles he has also pointed out that if individuals are overly concerned that the Bubble Bursting would have a serious impact on their retirement plans, then maybe now is a good time to evaluate individual risk tolerance and if appropriate rebalance the portfolio e.g. from 70:30 to 60:40 or 50:50 or to a level that allows one to sleep at night. Maybe portfolios have become imbalanced because the stock market has performed so well in recent years. Rebalancing is good financial planning and not necessarily timing the market.
I think information from good/reliable sources helps keep me on track. Otherwise I agree with you there is a lot of noise out there and easy to be influenced to stray from staying the course.
I like Ben Carlson. I don’t listen to his podcast but I read his blog on occasion.
He lays out choices for investing during a “market bubble” in the article below and says that for himself, “I’m doing nothing with my portfolio. I’m not making any changes.”
How Do You Invest During a Bubble? – A Wealth of Common Sense
The Jeremy Grantham (market bubble expert) quotes in that article sounding the alarm on the current bubble we’re in, and the realization these quotes were made in January 2021, lend further proof that ignoring the noise and sticking to your guns can be quite profitable.
To your last paragraphs point 👍👍👍I wish I could give it more than ones thumbs up !!!
Thanks! Glad it resonated with you as well.