Sometimes the slowest way is the fastest.
Allowing breathing room for your investments to grow is designed to work for you, not defeat you. After all, in life, time is the best healer and sooner or later, any downturn from the past will be erased. Even though the current drastic sell-off in the market can be compared to the 2000’s Dotcom bubble, decades from now, this will be a small bump in the road, not a barrier as long as you ride the course and not try to crush it.
Although investing is simply prediction and expectation by guessing what is priced into the future, taking risky uneducated day trading bets versus long-term passive ones both have different motives behind them. Especially when you tie your emotions to decisions and expect an immediate return, you should be concerned for yourself the most.
Never believing you are smarter than the market nor fighting the Fed will keep you sound and the best way to follow these mantras is sometimes by doing absolutely nothing at all. With our money, it is counterintuitive to say don’t touch it and hide and reinvest our paychecks since we cherish and want to take the best care for it yet a lot of time, too much of anything is a bad thing including readjustment in our portfolio.
Passively sitting and waiting for the best, is best. Patience is a virtue.
When you are unsure, that doesn’t mean you need to make a rushed decision. In fact, if you are ever uneasy about anything and someone pressures you to make a move, that is an immediate red flag. Maybe that’s why the divorce rate is so high. The ask can be too sudden and completely unexpected! Beware of your emotional and psychological triggers and stay patient because nothing good will come out of confusing brains with a bull market and disobeying the fundamentals.
During these wild swings, oftentimes, doing nothing will yield you more than you can imagine. Rebalancing and playing around with real not play money is never advantageous during a broader market sell-off.
Constantly rebalancing and going into aggressive retail trader investment mode is more dangerous than ever before since after all, active day trading historically underperforms passive investing through a diversified basket of stocks.
Taking care of yourself and your wealth doesn’t mean stretching it too thin or being too hopeful. That can do more unnecessary harm than good.
Tiger Kill
The hedge fund, Tiger Global Capital Management is known for its big audacious bets with unicorns to large-cap behemoths. They don’t play small and as a result, although they didn’t get trampled like Melvin Capital last year in the short squeeze against Reditttors, this year they are getting crushed harder.
Similar to Cathie Wood’s ARK Invest with overleveraged concentrated positions in Big Tech and individual growth stocks, you can only expect the worst here. The market was in overdrive since March 2020 trading on overvalued frothy valuations that it was hard NOT to lose money last year when fundamentals and valuations couldn’t be farther apart. Once the Congressional fiscal stimulus ran dry and the Fed’s 50 basis point tapering tantrum was announced last Wednesday, these lower discounted stocks that trade based on future earnings expectations with lower cash balances on hand turned into a discount, with most of the S&P holdings trading at 50–70% off their highs.
Nothing lasts forever nor does going at the speed of light. In sum, patience is truly a virtue, and building wealth over time is much more fulfilling and worth it for your mental sanity and energy than a one-hit-wonder trade that you end up needing to pay short-term capital gains on to fund your inflationary lifestyle.
Treating the markets as a race is a dangerous bet. There’s always a reason one invests and with a short-minded perspective, more often than not it ends up getting the investor and lottery winner into a worse state than where they started, psychologically and financially.
Sometimes waiting is your best bet especially if you’re looking to grow real wealth. Having a financial buffer is liberating and the ideal way to cope with any hardship.
In the real world, slow usually does in fact win the race. Try it out and I’ll meet you at the finish line with plenty to spare.