Everybody’s Talking About It

Our world changed last night.

We learned that all flights to and from Europe are going to be cancelled for the next 30 days. We learned that the NBA is going to suspend its season. And we learned that Tom Hanks and Rita Wilson contracted the Coronavirus.

It’s impossible to deny the seriousness of what we’re dealing with. For the first time in a long time, the world is blanketed in fear. And for the first time in a long time, everybody is talking about their investments.

If we’ve learned anything over the last few years, it’s how tribal the world is. We want to belong to a club, whether that’s in sports, in politics, and in investing, as we’re all about to find out.

The stock market has entered the public arena like only a bear market can. Over the next few days, weeks and probably months, you’re going to be hearing from a lot of people about what you’re doing with your money.

Are you getting out? I got out last week.

There’s always an element of peer pressure in the market, but usually it’s internal. The fear of missing out is comes from within. The fear of getting caught in a bear market hits you from all directions, with the media, friends, family, and coworkers all saying something like:

Wait, you’re not selling? Stocks are too risky. Don’t you see that?

Stocks are always risky, even if we don’t always feel it. And yes, you’d have to be living under a rock to not feel risk right now, but you’d be a fool to think you can successfully navigate it.

Everybody’s panicking. You’re not?

No, everybody is not panicking, it’s just that you’re only hearing from the people who are. And these people want you to join them because everything is tribal. We’re herd creatures and we feel safer together, especially during market dislocations.

When everybody does the same thing, everybody gets confirmation that they made the right decision. Nobody wants to be alone on an island. It’s much more comfortable to panic with your peers than to stay the course on an island.

Still in the market, huh?

They’ll say, as they breathe a heavy sigh, raise their eyebrows and shake their head. It’s hard to ignore this day after day and week after week, especially if the market keeps going lower.

But, when this thing finally does end, there will be a rally so fast and so furious that it will leave the people who sold like a deer in the headlights. They won’t know what to do. The idea that people who sell out of fear will buy out of greed is misguided at best.

If you’re making drastic changes to your 401(k), just stop. There is too much on the line. What you’re really doing is ensuring you’ll have less money in the future because you’re uncomfortable today.

It’s okay to be uncomfortable, in fact it is guaranteed that over the course of your investing life, you will feel this very same emotion half a dozen times, maybe many more.

You can be worried about lower prices tomorrow and still confident in higher returns in the future. That should be the default setting right now.