Thursday, February 11, 2016

I'm getting killed in 2016-- and that's OK

I don’t know about you, but my portfolio is taking a beating so far in 2016.

As of this writing, I am down more than 20% in the last 6 weeks. That wipes out my +15% for all of 2015 and puts me at about at the level I was in September of 2014 (net of any additional purchases made since then). Which, I think, is better than most … but it sure feels lousy. I think about my kids’ college money burning like a pile of leaves. The plan to pay for my elderly mom’s future medical bills, circling the drain. My own retirement, receding into the distance.

So this is it. We in the investing community—and that’s by definition with a long-term bias, as opposed to the trading community—we often talk about withstanding the downturns in order to realize the big gains which follow. We talk about adding to our existing positions on the dips, to lower our average per-share cost and position us for future rises. We talk about the grit and strong stomach required to hold, even to buy, in times exactly like this. All the practice, all the articles, the books, mentors, the courage we’ve mustered to get into this crazy sandbox in the first place, it all comes to this moment. Right now is why most people can’t invest for themselves. Right now is what they are afraid of. Right now is the origin of the horror stories.

But here’s the truth of it: we are stronger than they are. We can overlook today and focus on tomorrow. My all-time favorite Warren Buffet quotation isn’t the one about fear and greed. It’s the stock market is a device for transferring money from the impatient to the patient.” Right now is the moment the impatient are fleeing, and the patient get to keep the money behind.

The irony is that, awful as it is, we knew it was coming. We didn’t know when, or how bad or how long, but we knew it was coming because it always comes. That’s what it is to be an investor: a series of downs and ups, heartbreaks and triumphs. Following the stock market run that began in 2009, we’ve had a helluva ride, turning victory laps as the broader market more than doubled in 7 years (really only 5 years since we’ve now erased any gains made since 2014). So of course this would happen. And in fact it needed to happen to reset the overpriced businesses, to clear out the high-trading speculators and gamblers, to make prices attractive enough again for the rest of us to buy—which sets up the market to rise again to a higher level.

My friend Morgan Housel just wrote a piece this week about how it is that the markets gyrate as they do, and why that is not only normal but necessary. And my friend Ben Carlson just posted an article about how we view bull and bear markets differently, despite our commitments on each cycle not to do exactly that. Finally, if you’re still panicky, re-read my post from last July about when to sell—and when not to sell.

And get your clicker finger ready to hit the Buy button. Because this won’t last forever, and prices are getting more attractive every day.

Drifting to Fifty | Random unrelated nugget of the week

If inside your suitcase you roll your carefully-folded slacks and shirts around a pile of underwear, socks, pajamas, and shaving kit, the folded clothing will be less wrinkled when you arrive.

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