I got mixed feedback from subscribers after I sent this brief note last Sunday night.
Some appreciated the stats that reminded them that volatility is always to be expected. Others noted that the recent pullback was far from nerve-racking and that the note was unnecessary.
I often say that I’m a long-term optimist, but a short-term cautious optimist. This is because while I’m bullish about being invested in the stock market, I’m well aware that the economy often goes into recession and stocks often go into extended downturns. This is just part of the deal.
And believe it or not, I consider myself a relatively anxious person. When the VIX jumps and stock prices drop, my first thought is always, “How much lower could prices go, and should I take some risk off?” I’ve been this way for as long as I can remember.
But with experience and education, I’ve come to understand that it’s okay to have emotional reactions — just don’t start trading on them.
The best defense against making a mistake with your investments is education. This means understanding that long-term investing comes with frequent single-digit pullbacks, many 10%+ corrections, and occasional 20%+ bear markets. Furthermore, it means understanding that it’s difficult to trade these moves in a way that’s more profitable than just buying and holding.
This post was originally published here
