More time on the clock?
“What if we’re not in the bottom of the 9th but the top of the 5th? What if the past 10 years were unbelievable for U.S. stock market investors but the next 10 years are just as good or better? Would I bet my life on this outcome? Of course not. There are too many differences to count between these two periods and even if there were similarities, no two market cycles are ever exactly the same. But what we can learn from history is that bull markets tend to run for much longer than most investors would ever think is possible.”
– Ben Carlson, writing in his A Wealth of Common Sense blog on 12/5/19. He cautioned readers against using common sense when trying to understand bull markets. Read more at bit.ly/35vxTzt.
Too much of a good thing
“What we found in our study is that, if people behave like ants, it can be very problematic. Once they get into the habit of saving, it’s very hard for them to break it. The behavior becomes sticky.”
– Tao Guo, assistant professor of financial planning at William Paterson University, quoted in an 11/6/19 New York Times article about striking a healthy balance between financial security and enjoying life. Guo said that while he teaches his kids about the industriousness of ants who work hard all summer to prepare for winter, many older people have a hard time spending in the winter of their lives. Read more at nyti.ms/2PSDLMA.
Waiting for the other shoe to drop… and waiting
“Bottom line: yes, options markets are twitchily expecting the next big crack in U.S. stocks. But they have been doing that since 2014, and the S&P has almost doubled during that time.”
– Investment analyst Nicholas Colas, co-founder of DataTrek Research, in a 12/15/19 article on CNN.com about the “Black Swan” index. The indicator, which monitors demand for options that would pay out if the U.S. market experienced a sharp, unexpected drop, recently jumped to its highest level in 15 months. Read more at cnn.it/2rVvYpc.
The right point of reference
“Looking at your own investment strategy, what is an appropriate measure of success or failure?.... The Dow Jones Industrial Average is a measure of the stock values of 30 large companies, divided by a factor that adjusts for stock splitting. The S&P 500, meanwhile, includes those 30 companies plus 470 more. But what do the values of those specific companies have to do with your portfolio? Comparing your investment performance to these benchmarks ultimately answers the wrong question. ‘Did I beat the Dow?’ has little to do with whether or not you are on track to reach your financial goals.”
– Morningstar behavioral economist Sarah Newcomb, Ph.D., in a 12/9/19 article, in which she recommended using your own, personalized goal as your benchmark. Read more at bit.ly/34tL5Dz.
