They come in the night. From the deepest dark, they reach out. Searching. Your fear sustains them. Panic slides you deeper into their grip and dawn will never break for you. You can light bonfires and set a watchman to keep them at bay, though. Light is their enemy and a diligent guard will quickly put them on their way to seek an easier meal.
Market selloffs can mean dark times. This is the easiest environment for investment product sellers to hunt for their prey – you (and me). I get cold calls and emails daily ranging from what worked last year (but is probably a dog now) to today’s buzzword (liquid alts and smart beta these days). They know that down markets motivate people to take action, even if it’s against their best interest. It’s easy to forget that the market will turn around and a long-term perspective will carry investors to the next dawn. In the meantime, here are some bonfires to ward off the beasts of the night:
Bull Markets vs Bear Markets – Ben Carlson, A Wealth of Common Sense
This is a great summary of how emotions change through the market cycle.
Shareholder Letters – Warren Buffett, Berkshire Hathaway
Which one should you read? Any of them! If you’re afraid the world is about to end, read Uncle Warren’s letter in the New York Times that he wrote during the financial crisis – Buy American, I am
What Panic Meant 143 Years Ago – Jason Zweig, Wall St Journal
Ok, this is a little longer-term than most people need, but it does add perspective on panic and ends with this gem, “By spreading the fear that flushes out such “garbage” in the short term, panic ends up improving the hygiene of the market in the long term. That’s good for investors who have the staying power to outlast a panic — and bad for those who don’t.”
These bonfires might not be necessary with a good guard, a trusted advisor who acts as a fiduciary. There is tremendous power in being able to say, “I’ve got a guy who takes care of that for me. Run it by him first.” Let the advisor do the heavy lifting – saying no to the quick-talking, hard-closing salesman. Meanwhile, you can sleep well at night knowing dawn will soon break.