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Tuesday, July 29, 2014

Along the Wall of Boredom

I recently read an article in the Wall Street Journal which began with quite a catchy sentence:
"Investing graybeards like to say that "bull markets climb a wall of worry." This one has been sleepwalking up a wall of boredom".

The article, written by Jason Zweig for The Intelligent Investor series, is about how investors should prepare themselves for the inevitable market downturn.  Below are a few more notable quotes excerpted from the article:

"As of this Friday, the S&P 500 has gone 980 days without a 10% decline, according to Birinyi Associates, the fifth-longest such stretch on record.... thus the perfect pretext for investors to think about what they will do when the market takes a serious beating.
For, sooner or later, it surely will—and those investors who have honestly prepared for it will stand the best chance of surviving unscathed. In a downturn, you won't be the same investor that you are now—unless you rely on rules and procedures, rather than willpower alone, to regulate your behavior."

The article goes on to further state: 
"In calm times, like the markets of the past few months, it's hard to imagine how you will feel when all the arrows turn to red from green. What's more, even in the heat of the moment, when your body and brain show the signs of acute stress, you might not be consciously aware of the pressure you are under."

Unfortunately, we don't get to invest in markets that only go up.  We are also unable to predict when markets will go up and then down and then up and then down, etc. etc. etc.  

Instead, we firmly believe that smart investing is about discipline and procedures.  When the next market correction occurs, we will rely on this discipline and apply the procedures that we believe will keep our clients on track to meet their long term financial goals. ~FSB