When the market sell-off first started in February, there were several articles proudly pointing out how few 401k investors made any changes to their accounts. Nobody panicked! Yay! I remember thinking that such a declaration of victory was rather premature. If you have held onto your stocks so far according to your formal investment plan, then I applaud your conviction (or ability to not check your 401k balance). However, I also think it’s important to realize that the ride may be far from over.
This chart made the rounds in 2007 during the Great Financial Crisis, and has been copied so many times (you can tell by the blurriness) that I have no idea the original source. However, I still come back to it time and again.
Based on my own experiences, I can show you comments which gradually change from “This is just a temporary setback. I’m a long-term investor!” to “I can’t handle any more losses. I am selling and waiting this out!”.
My wild guess is that we are past the Anxiety stage and are somewhere in the Fear stage. There is still room for Desperation, Panic, and Capitulation. It’s like the awful seven dwarfs… I feel these emotions too, even if I don’t act on them. We are living through a historic moment. However, I see no permanent impairment in the power of productive businesses.
You won’t see a lot of market commentary on this site, as I don’t think adding to the noise is helpful. Thanks to the scientists and healthcare workers that will get us through this one, thanks to the other essential workers that have to stay out and about, and thanks to those that are helping by staying at home. Onwards (good movie BTW) to Hope and Relief!
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