Last year’s sideways market has given way to this year’s rally, which has been steady overall so far. It’s been interesting for me as an investor to slide back into the experience of “good times are here again” after last year’s slog.
To be clear, I try to take my own thoughts with a grain of salt. And I have no pretensions about my role in the process. As I wrote a little while ago,
I’m just along for the ride. My own thought processes are really just ways to soothe myself as the market does whatever it is going to do.Day 312: Along for the Market Ride, No Matter What, from June 16, 2023
I like that I wrote this. It is perhaps the clearest statement I have made on my own thinking as an investor. It’s a reminder that at the end of the day, my job is merely hanging on no matter what the market does.
After all, isn’t that what long-term investors are supposed to do? The protocol is simple: 1. Regularly contribute to a diversified porfolio of low-cost index funds. 2. Give it time to grow.
Sounds easy enough, right? Yet merely hanging on is no small feat. Research in behavioral economics shows that one of the hardest things for investors is doing nothing. Ironically, it seems that the best investors either have forgotten about their accounts, or are dead!
This is because as a rule, we humans have a strong tendency to screw up our finances, especially in times of extreme greed or fear (we have gone through both in the past three and a half years). In many cases, the less hands-on we are about our investments the better, because there is less temptation to take(the all-too-often wrong) action. No wonder inactive or deceased investors perform the best!
Personally, I look at my portfolio frequently and follow changes in the market. So far, this hasn’t been to my detriment.* But I don’t kid myself. I’m as human as the next person. So far I have kept my head through a Pandemic crash and last year’s bear market. I play the game of buying more shares on discount when the market is down. And I am satisfied knowing that, while my own investing thinking may not come up with something brilliant or market-changing, it doesn’t have to. It only needs to keep me in the game… hanging on.
*I admit it hasn’t really helped me much, either, other than giving me knowledge of changing market conditions and providing the entertainment of following along.