The markets have taken investors on a wild ride in recent days. That can give rise to all manner of harmful thinking and behavior, such as fear and panicked selling. At times like this, it can be helpful to take a step back — to remember and reflect on some timeless principles and insights about wise investing.
The following quotes are drawn from various SMI articles over the past several years.
Presidential pain
“There’s a long tradition of new presidents implementing their painful policies as quickly as possible upon taking office, so the positive benefits are obvious by the time their term is ending. Trump’s policy mix seems tailor-made for that plan, given its ‘pain now for benefit later’ tilt.” – Mark Biller, from the January 2025 cover article, Trump 2.0: Using Objective Investing Models to Guide Us Through Anticipated Disruption
An antidote to irrationality
“Emotions are stronger than reason. The markets can be volatile and irrational because investors often behave in emotional and irrational ways. Fear and greed are strong drivers of poor investing decisions. This means it’s essential to develop — and consistently follow — a rules-based approach to decision-making. The rules provide boundaries that serve to protect us from the markets and ourselves.” – Austin Pryor, from the February 2024 editorial, 6 Investing Facts to Consider When Risking Your Money in the Stock Market
Locking in losses
“During every bear market, millions of investors make misguided decisions to sell near the bottom. Regrettably, they miss the inevitable rebound on the other side.” – Mark Biller and Joseph Slife, from the June 2022 cover article, Facing Your Fears: Modeling the Impact of a Significant Bear Market on Your Financial Plan
The middle lane
“The mood swings of the securities markets resemble the movement of a pendulum. Although the midpoint of its arc best describes the location of the pendulum ‘on average,’ it actually spends very little of its time there. Instead, it is almost always swinging toward or away from the extremes of its arc. But whenever the pendulum is near either extreme, it is inevitable that it will move back toward the midpoint sooner or later. In fact, it is the movement toward an extreme itself that supplies the energy for the swing back.
Investment markets follow a pendulum-like swing:
• between euphoria and depression,
• between celebrating positive developments and obsessing over negatives, and thus
• between overpriced and underpriced.
This oscillation is one of the most dependable features of the investment world, and investor psychology seems to spend much more time at the extremes than it does at a ‘happy medium.’” – Howard Marks, from the June 2023 SMI cover article, The Most Important Thing
Taking it in stride
“Taking your cue from the Parable of the Talents (where the master was away for ‘a long time’), make your strategy a long-term one that aspires to build wealth slowly. This will allow you to take up-and-down market cycles in stride. Time is the enemy of the speculator, but the friend of the investor.” – Austin Pryor, from the September 2022 editorial, The 7 Qualities of a Disciplined Investor
Easier said than done
“One of the most difficult aspects of investing and trading is staying with your original investment philosophy…. It sounds like a relatively simple proposition to make an investment or trading decision based on a particular approach and then to stick to that plan come what may. In practice, though, it is difficult. Many people, developments, and psychological hurdles are ready to trip us up at the very first opportunity. We begin with the very best of intentions; yet so often we find ourselves changing our plans in mid-course and losing out on what could have been a very profitable investment or trade.” – Martin Pring, from the February 2023 cover article, Patience is a (Profitable) Virtue
No one knows
“Success in investing comes not in hoping for the best, but in knowing how you will handle the worst. No one knows what is going to happen next year, next month, or even next week. Your plan must allow for the fact that the investment markets will experience unexpected rough sledding now and then. That’s where diversification comes in. The idea is to pick investments that ‘march to different drummers.’” – Austin Pryor and Mark Biller, from the February 2021 cover article, The Core Building Blocks of Successful Investing
Fuzzy thinking
“For most purposes in daily life, your brain is a superbly functioning machine, instantly steering you away from danger while reliably guiding you toward basic rewards like food, shelter, and love. But that same intuitively brilliant machine can lead you astray when you face the far more challenging choices that the financial markets throw at you every day. In all its messy, miraculous complexity, your brain is at its best and worst — its most profoundly human — when you make decisions about money…
“When the great investment analyst Benjamin Graham was asked what it takes to be a successful investor, he replied: ‘People don’t need extraordinary insight or intelligence. What they need most is the character to adopt simple rules and stick to them.’” – Jason Zweig, from the February 2019 cover article, The High Cost of Fear
Retiring in a downturn — with peace
“While this article cites just two examples of SMI members who have had peace of mind during 2022’s market downturn despite being in or near retirement, it’s noteworthy that both use a budget to manage their day-to-day cash flow. This has given them options for dealing with today’s high inflation while also helping them plan for the potential of less portfolio income (at least during the early years of retirement). Both also have used MoneyGuide to develop an investment plan and continue using it to update numbers and run ‘what-if’ scenarios. And both made the jump to SMI Private Client as they neared or entered retirement to reduce the stress of managing their portfolios in later life.” – Matt Bell, from an article in the January 2023 issue, This is Not a Test — Retiring in or Near a Bear Market
The safest place
“Isn’t our security, whether spiritual, physical, emotional, or material, to be found in [God’s] loving promises rather than our human efforts and disciplines? Our confidence is to be in Him.
“‘For in the day of trouble he will keep me safe in his dwelling; he will hide me in the shelter of his tabernacle and set me high upon a rock’ (Psalm 27:5).” – Austin Pryor, from the March 2022 cover article, Investing That Glorifies God Values His Majesty
You know what to do. Tune out the noise and keep following your plan.
