There are many mistakes we can make when we invest, the most major of which is to sit out the market.Most of the rest lead us to the conclusion to sell our portfolio and “wait for a better time to invest.”
On a regular basis, I speak to people who sold out of the market in 2009 (when the S&P 500 was about 1000 vs. today’s level of around 2700) and I wonder what influenced them to do something so destructive to their financial lives?
I think I’ve figured it out and honestly, it wasn’t that hard. Talk to anyone who is sitting in cash and you’ll find they know pretty much everything the financial media has said in the last week.
The financial media exist to make money and they do that by gaining and retaining eyeballs. If they can get you to watch, they can charge more for advertising and be more profitable.
That’s it. That’s the game.
Now, what do you think gets more people to watch: Telling us everything is great and the markets will survive whatever challenges are here today or telling us the markets are on the verge of total destruction because….blah, blah, blah?
Of course, negative news sells, tapping into the part of our humanity that pays more attention to danger than joy.
Getting sucked into the 24-hour market news cycle is about the worst thing you can do for your Financial Life, because the “news” they convey is and always has been tilted toward the negative.
To understand this better, take a look at the latest Optimistic Investor where I calculate the return of the “Last Dumb Buyer” who bought stocks in 2008, the last day before the market crashed.Care to guess her return through January 2, 2019?
It was nearly 100%!
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