So, stocks are falling. The major indices have officially entered correction territory. This should be no big surprise to anyone who understands that volatility is normal in investing.
While investors know this rationally, when it actually happens, many are unprepared, afraid and usure about what to do.
Morgan Housel writes in his Feb 23, 2022 blog how Historian Stephen Ambrose talked about World War II soldiers who left basic training full of bravado and confidence, eager to fight when they join the frontline. Then they get shot at, and everything changes.
“There was no way training could prepare a man for combat,” Ambrose writes. It could teach you how to fire a gun and follow orders. But “It could not teach men how to lie helpless under a shower of shrapnel in a field crisscrossed by machine-gun fire.” No one could understand it until they experienced it.
Being an investor is not that much different. They understand there will be corrections and bear markets but when they actually happen, many are not emotionally ready.
At this point, I could run through a bunch of statistics and talk about the value of diversification and long-term planning etc. but I think you’ve listened to me say that before many times.
There have been numerous stock corrections since 2009: -16.0% -19.4% -13.3% -10.2% -19.8% -33.9% -11.9% (this one) (1). During each one we emotionally feel the world is going to slide into an abyss until 3, 6 or 12 months or more later, when it does not feel that way anymore because the apocalyptic event du jour is largely forgotten. I suspect this time will be the same although I don’t know when that will happen.
Thanks for reading
(1) Ben Carlson – Feb. 23.22
(2) The views and opinions expressed in this article may not necessarily reflect those of IPC Securities