Don’t Measure the Moment

“We’d all be better investors if we just made fewer decisions.” Daniel Kahneman, Nobel Laureate Economist

“The stock market is tumbling!” cries out every journalist. “The sky is falling!”

The market is down. Really? Compared to the all time high? Then yes, it’s down 13% as of today. That’s measuring the moment.

We’re up over 5% from a year ago. That is still measuring a moment.

We’re up 27% from the peak before the Covid Crash in February 2020. Equity trend-line returns are 10% per year. From that point, the trend line suggests we should be up only 21%. Not 27%

So is the market down? Or is it up?

From 5 years ago, the S&P 500 is up 79%. The trend line would suggest that it should be only up 64% from that time. And the 79% doesn’t include dividends!

From 10 years ago, the S&P 500 should be up 170%. The price is up 204%. With dividends, through the end of February the S&P 500 is up 305%!

Your money would have quadrupled in 10 years.

Is the market up? Or down?

When you only look at the moment, you get a much different picture than when you look at the trend.

Don’t measure the moment. Track the trend.

If you are an owner of the best businesses in the world, you are not “losing money.” If you have been a long-time owner, you have been making money. Your values are temporarily fluctuating, but you have not lost money.

Even if you sold, now, at 13% down from the all-time high, you will not have lost money if you’ve owned them for years.

But why would you want to? Why would you want to stop the compounding? Why would you interrupt the glorious growth?

The owners of the best privately held companies are not selling their ownership because of the current “crisis.” Why would you sell yours?

The only reasons you would not want to “be in the stock market” because it’s “going down” is because:

A. You don’t understand the difference between investing and marketing timing.

B. You are measuring the moment.

We are owners of the best businesses in the world. We are not stock traders. We are not speculators. We are not market timers. We are owners.

Have a plan. Stick to the plan.

Don’t measure the moment. Track the trend.

This article is educational only and is not intended to be investment, legal, or tax advice or recommendations, whether direct or incidental. Again, this is not investment advice. Consult your financial, tax, and legal professionals for specific advice related to your specific situation. Never take investment advice from someone who doesn’t know you and your specific situation. All opinions expressed in this article are the opinions of the people expressing them. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. RetireMentorship is not affiliated with any Registered Investment Advisor, Broker-Dealer, or other Financial Services Company.