Gut It Out

Long time reader Bernie offered this last night;

Roger, I am not to sure what a sell signal is or what a buy signal is. Since I am pleased with my portfolio, mostly blue chip and income producing. I see no reason to sell. Since I am in the stock market for the very long term (even being 62)I see no reason to generate buying or selling costs.

Fair enough and he has a point. This all ties in to what I posted earlier and with the importance of asset allocation. The market will work for you if you let it. It averages 10% or whatever by being up and down varying amounts over long periods of time. As I hear from readers and clients, I can tell that the biggest obstacle to success is people's own hang ups and emotions. I observe a concern with the wrong thing. People want to be right this summer. Bernie seems to have figured out how far down on the priority list that should be.

To take the other side of Bernie's comment there is some value in sparing yourself from some of the next 30% decline. If you go down 20% when the market goes down 30%, that spread means your money will not have to work as hard as it otherwise might have to in the future. Twenty percent sounds awful, and for some multi month period it is but I think that is the wrong worry.

What is your time horizon? If it is long enough that you should own equities in a meaningful way, you will get that average 10%. Maybe only 9% but that is still enough if you have saved properly. A fun fact I like to toss out on this site every now and then is where the S&P 500 was ten years ago. On June 14, 1996 the S&P 500 closed at 665.85. That is an 84% gain, a little below normal but enough for people that have saved properly. Over the next ten years it will probably do something similar. Even if you think it can only do half that you can get close to the 10%-ish annual average gain with some foreign investing.

I try to add value to client accounts, and hopefully I do, but I am always cognizant of trying to add "too much" value by over-trading. Over time changes do need to be made but probably fewer changes than most people think.