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Gain a retirement advantage™

Everybody knows that stocks are a better long-term investment than cash or bonds. But everybody also knows the pain you must endure to earn those long-term returns is too much for some people to stomach. That’s why it’s called a “risk premium.” Investors demand compensation for being invested during the times when it feels like you want to vomit.

There are no guarantees when it comes to investing, but generally speaking, volatility spikes subside, and investors who can hang on are rewarded. I know the chart below (Exhibit A for Advisors) only goes out six months, so maybe a different way of framing the previous message is that investors who panic-sell during a vol spike usually feel like idiots six months later.

Watching dollars vanish from your investment account week after week is painful and frightening.

“Oh no, my portfolio was worth $275,000 a month ago. Now, it’s down to $230,000. I should probably do something because if I don’t, it could be $200,000 next month.”

Fighting the thoughts inside your head is hard enough. Fighting other people’s darkest fears is even harder. Especially when the other people are “investment professionals.”

My friend Michael Antonelli tweeted something important on Friday. He said:

“Hearing everyone’s thoughts 24/7 is the worst thing to happen to society since the mosquito.”

I don’t know if this is literally true, but it’s a damn good point, and it got me thinking about who you listen to during a volatility spike. This is not a commercial for Michael’s podcasts, although you could do worse. I’m talking to myself as much as to you.

A week ago, when futures were tanking and Bitcoin was crashing below $75,000, I saw someone whose opinion I value tweet something about how it was the end of the bull market and that prices could fall to $10,000. And, I’ll admit it, I thought about selling it all. My point has nothing to do with Bitcoin; replace that with any person and any asset.

If you’re not careful about whose opinion you let enter your brain when emotions are heightened, it’s easy to hit a button you will regret pressing when fear takes over the steering wheel.

Probably worth mentioning that listening to the forecast of bulls on mental meth can be as dangerous as listening to people telling you the market is going to crash.

Okay.

Remember, nobody can see the future. It doesn’t matter what their credentials are, how much money they manage, how many followers they have, or how right they’ve been lately.

You can’t control where the market goes, but you can control how much noise you allow to pollute your brain. If you, like me, were tempted to do something out of fear because of a tweet you saw, do yourself a favor and mute that account.

Speaking of who you should listen to, Joe and Tracy have been on fire lately. Last week on Odd Lots, they spoke with Jim Chanos, who said a great line I’d never heard before:

“In bull markets, people put a premium on promises, and in bear markets, they put a discount on reality.”

Enjoy the rest of your weekend. Back at it tomorrow!