“In every life we have some trouble, but when you worry you make it double” – Bobby McFerrin
There has been an onslaught of negative press as the US stock market has reached new highs (see chart below). The worrywarts and permabears have emerged in force as they always do as we enter new territory. Dire warnings about an imminent market collapse abound along with advice to sell now and stay in cash. Nothing changes.
What we know from experience is that:
- Stocks are the best asset class for earning long term returns
- Stocks occasionally exhibit terrifying drawdowns (think back to 2008-2009)
- Stocks on average fall 20% or more roughly once every 3-5 years
Unfortunately, despite the clamour from the so-called experts, we don’t know when we will experience the next bear market. Holding during a bull market such as we are experiencing now is difficult because you’re always worried about when the fat lady is going to sing. And holding during a bear market is always difficult because you never know how bad things can get. As always, emotion is the enemy of a well-constructed portfolio. Too many investors outsmart themselves by trying to outsmart the market. It doesn’t work.
As long as you have put in place a reasonable asset allocation that you are comfortable with and one that you can stick to as the going gets rough, you’ll be fine.
For most of us most of the time, worrying will be counterproductive. It will lead to bad decisions and poor returns.