“The first principle is that you must not fool yourself and you are the easiest person to fool.”
When stocks fall 20%, investors start asking questions. This demand is met with an endless supply of people happy to provide them with answers.
There will be no shortage of people claiming that they nailed the past and can help you navigate the future. Not everyone is a charlatan, I know some full-time traders who I respect that were very vocal about the downside risks. However, it’s important not confuse other people’s objectives with your own. Professional traders should be in cash, the average investor who’s saving for retirement most definitely should not.
If you’re feeling like you “saw” the bear market coming, that’s because hindsight bias attacks our senses in times of distress. Believe me you didn’t. If you’ve convinced yourself that you did, open your brokerage account right now. Have you been 100% cash for the last two months? How many short positions do you have on? Now that we’ve cleared up the illusion that you knew a decline was coming, maybe you can stop pretending that you have any idea what happens next.
It’s easy enough to fall for your own bullshit, don’t fall for anyone else’s.
(Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. For additional advertisement disclaimers click here.)