What are our truths?
Suppose Alternates
I suppose that when people say “buy low” (as in “buy low, sell high”) what they are really saying is buying when negativity is low. Negativity is low when the prevailing sentiment is good, If everyone is buying, then the general mood is optimism, and as such people who buy face little doubt. “Everyone is doing it!” There is insufficient criticism, so they buy.
But
In the same vein, when people say they want to “sell high,” what they are saying is that they want to sell when the general sentiment is higher than when they bought. Price seems to be a secondary matter. It is their well-being that is the focus.
What Is Your Truth?
Humans are notorious at deception, especially self-deception. Or at least self-imposed ignorance.
Statistics vs. Reality
A famous study of investor behavior showed that individual mutual fund investors earned far less than the reported gains announced by these mutual funds. Called “The Dalbar Study,” investor behavior such as market timing, chasing the latest performance gains, and so on, substantially reduced return on investment.
A thirty year study, during the period 1992-2021, showed while the S&P 500 gained an annualized average of 10.65% per year, individual mutual fund investors averaged 7.13% annualized.
Time And Again
As often has been said, time in the market beats timing the market. However, it seems market volatility induces the insatiable desire to do something. Why does doing nothing seem most difficult? This situation echoes what French philospher Blaise Pascal (1623–1662) who wrote: “All of man’s problems stem from his inability to sit alone in a room for any length of time.”
Sitting alone in a room would be the best training for a would-be investor. Patience indeed.
And as Warren Buffett said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
The Line
I would guess that people are too impatient to learn patience.
Are you a patient investor? Let me know here.
The illustration of Saturn’s ring as seen from Saturn is from The Story of the Sun, Moon, and Stars (1898) by Agnes Giberne. Courtesy Library of Congress, Washingon, D.C.
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