compscidude wrote:
Did you know that even Warren Buffett has newspapers lining the wall of his office, front pages with great unexpected market events and crashes - to purposefully remind himself every day of what is possible?
I have print outs of some people's historical '
everyone better sell up and run for the hills' posts on my wall, to purposefully remind me every day that being spooked out of the market for long periods can also be very, very expensive...
Opportunity cost is something that's almost
guaranteed to kill long term returns, and especially when compared to strongly-proposed worst case scenarios that never actually materialise....
Here's one of my favourites from back in 2016 -
December 15th 2016 -
Some people say, 'the best time to buy is now'. These people are wrong, as a moment's glance at any diagram of market history will show you. There are good times and bad times to be buying.
Right now, in my opinion, is almost certainly not a good time to be buying. It is probably a good or good-ish time to be selling to cash and staying there. So I am ringing my 'danger' bell. Here's why.https://www.lemonfool.co.uk/viewtopic.php?t=1631In November 2020, I took a detailed look at how things had progressed since the above 2016 post, which readers can see using the following link -
https://www.lemonfool.co.uk/viewtopic.php?f=7&t=1470&start=40#p353949I won't spend any time updating that market progress from November 2020, other than to say that on a cursory look, the DOW looks to have progressed by around another 10%, and the S&P by around 20%, which when taken into account with the large gains detailed in the above link between 2016 and 2020, hopefully helps me to make the primary point for this post -
A loud and repeated call discussing reasons to stay out of markets will, of course, eventually come true,
but even when they inevitably do, long-term results of such repeated calls will need to be taken into context in terms of the
long-term opportunity cost of being spooked out of the markets during all those very long periods where such calls were
wrong...
Taking the above 2016 '
ringing my danger bell' post is a clear example of this very important point...
I ignored the above 2016 post, as I've ignored many other similar posts over the years (all the way back to the Motley Fool days, as it happens...), and looking back at the market returns I've made since, by largely staying fully invested throughout, and riding out the many market-dips we've seen since, many of them very large indeed, I've managed to generate a level of return that could actually *still* be hit by some future market event, and *still* be in credit by a large degree...
That final point is the primary reason for me posting here - level-headed, long term, sensibly-diversified investors should be
far less scared of some
inevitable market drop in the future than they should be of being spooked out of the markets for very long periods, and looking for yet another reason '
to stay in cash'.
Level-headed, long-term, sensibly-diversified investors are likely to be almost
guaranteed to lose more capital in terms of
opportunity-cost over many years in that scenario, than they are likely to do by allowing themselves to stay largely invested in sensibly diversified elements, and to continue investing through the quite simply
inevitable market downturns.
Cheers,
Itsallaguess