October 10, 2013 | Posted in:Investing
Yesterday morning in a dentist’s office reception area, I was left alone with my thoughts, and a great book that I had been looking forward to reading — BUT – they had their TV turned on and it was blasting a morning news program.
I tried to ignore it, and just read my book, but no matter how I sat I couldn’t plug my ears enough to allow my brain to focus on the pages. Against my better judgment I decided to watch the program, and see what was going on in the world (more like “what wasn’t going on in Washington”).
What I witnessed was truly disturbing. They had a giant running countdown until the deadline that Congress has to make a decision over the debt ceiling. Literally all of the news centered around the Washington impasse.
So they brought in a correspondent via satellite with whom they were probing for facts about the government shutdown, the debt ceiling, and what it all meant to the job market, the stock market etc.
My attention piques any time people start talking about money.
This well-dressed, well-groomed, yet almost frantic reporter brought up the fact that American’s 401k’s have been and are currently “under attack”. She made it abundantly clear that the stock market is failing, and people are losing money.
A giant red down arrow appeared on the screen, while she stated that the Dow Jones Industrial Average dropped about 159 points on Tuesday, or 1%. She was doing a tragic “the end is coming” segment all because the stock market dropped one single percentage point in a day.
Yeah, no shit 401ks are under attack. If you scare people who don’t really know any better, what do you think they’re going to do? They’re going to panic, and start selling their investments. They don’t know that the stock market loses 1%, 2% and occasionally 3% on any given day, during any given week.
It’s what she didn’t report that I find to be the most disturbing thing of all: she didn’t say that the markets would probably be fine after the gridlock in Washington ended.
And guess what! The market went up over 2% today!
In my mind, if you’re a news station, and you allow these types of garbage scare tactics to air, then you lose your credibility as a valid newsource.
Let’s put this week’s stock market movement into perspective. We can assess the ‘damage’ done to your portfolio this week based on a $25k, $500k, and a $1M starting balance.
|Starting balance invested in VTSAX (Vanguard Total Stock Market)||$25,000||$500,000||$1,000,000|
|Friday - stocks are up, life is good||$25,181||$503,639||$1,007,278|
|Monday - political bullshit starts/continues||$24,958||$499,176||$998,352|
|Tuesday - fuck! sell everything! the sky is falling! save the children!||$24,624||$492,484||$984,969|
|Wednesday - wait.. that wasn't so bad||$24,612||$492,249||$984,499|
|Thursday...and we're back||$25,164||$503,285||$1,006,570|
THIS IS WHAT YOU WERE SCARING PEOPLE OVER!?!
I call this the Stock Market Crisis Syndrome. It’s when analysts look at one single day, one week, even one month of market losses, and they interpret their readings to the layperson in the most chaotic, foreboding way possible. 9 times out of 10 they’ll bring up either the Great Recession or Depression for contextual reference. These people are analysts, they should know the most about the markets, but they allow themselves to be victims and purveyors of the Syndrome.
The stock market is a bit of a roller coaster. It goes down a little. It goes up a little. It goes down a lot. Then it bounces right back. And then some. That’s how it works. You don’t need any bullshit reporters or “experts” exacerbating the situation. Especially when they are reporting out of fear because they personally are afraid of the political turmoil that may be happening at any given time.
The average young family has a little less than $25,000 stashed away for retirement. This past week they lost less than $400 of their nest egg. Oh, wait, no they didn’t. By market close on Thursday, they actually gained $164 over the 5-day session.
Even the Million Dollar portfolio, at it’s lowest point was only down about $5k. Does that sound like a Crisis to you?
Who even really cares what the stock market did in one single week? Who pays attention to what the stock market is doing in the first place? That goes against the basic principles of Advanced Living. Market investments are to be kept for decades before being used. Market charts, analysis and psychobabble should be ignored by investors at all costs, and I’m not talking about the suits on Wall Street, I’m talking about you and I.
There will always be some type of political stagnation/gridlock/debate going on that will either spur the markets or force them to retract. That’s life. That’s the stock market.
We should be investing in the market whether it’s up, down or stale. We should understand that the money we’re temporarily letting go of is in the hands of the market gods, which could mean dealing with serious short-term losses. But the gods are good, because the markets always bounce back.
To this day, and far beyond, the market will continue to reach record highs. And if we don’t allow the media to affect our judgment, and we hold on to our investments for the long-haul, and we keep pumping money into them even when the markets are depressed — especially when the markets are depressed — we will end up way ahead.
The next time you want financial advice, do yourself a favor and turn the squawk-box off. Unless you’d rather get an earful of Stock Market Crisis Syndrome, or it’s equally dubious brother Stock Market Sensationalism Syndrome. In short, don’t let reporters convince you to sell your portfolio every time you lose a few hundred bucks.
If you’d rather be prepared, and learn pretty much everything you’d ever need to know about the market check out this page.