Financially Speaking Podcast

Beyond My Control or Lessons Learned

Published on November 10, 2014

The month of October 2014 proves an insightful lesson for investors. Beginning the last 10 days of September, the S&P 500 stock index started to fall, and by the end of the first week of October the slide continued with intensity. By October 15th, the market had lost around 9 percent%. Of course, some investors began to worry, some worried a whole lot and some were angry.
When I step back and think about those conversations, I generally heard “I should have sold last month than the top of the market” (regret) or “What do you think is going to happen?” (fear).
The feeling of regret indicates that some investors just haven’t bought into the fact that they cannot time the market. Certainly is was easy for anyone to look back on October 15th and the think that they should have sold on September 19th. But there was nothing out there that indicated that stocks would drop nearly around 9 percent for the coming four weeks. No one can successfully get in and out of the stock market to avoid the bumps in the road. Nobody can do that. Nobody. So getting angry in October doesn’t help anyone -- not the investors, not the market -- only makers of Rolaids.
The feelings of fear were based on the constant discussion in the media of “what-if scenarios.”  The scenarios ranged from being ridiculously and laughably unlikely to being thoughtful. It is hard for investors to sift through all that scenario noise to focus on the thoughtful. It is our nature to worry about the unknown, what-if possibilities, especially when we see similar discussion on different TV stations.  
It is fear and regret that pushes some investors to let their feeling control their decisions, and then disaster strikes. When we think about it, we don’t have any control over the ridiculous, laughable scenarios. So we end up worrying about possibilities over which we have no control.  
By the end of October, the stock market had recovered its losses and was reaching for new all-time highs. Who would have thought on October 16th that the stock market would recover in less than two weeks? Any investor who got out of the market on the 15th would be been faced with the decision of when to get back in. Very hard to do.
October 2014 investor lessons: first, ask yourself “How actionable is everyday news?”; second, while holding remote in your right hand, change the channel. 

Tags: investment decisions; investors emotions; investor fear; investment management

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