Couple of problems with being human.  Well, OK, more than a couple but we’ll limit to two for the sake of discussion.  Anyway…

  1. We assign way way way too much value to the most immediate events.  It’s called recency bias.  The S&P 500 went from a low of 666 in March 2009 to over 2,900 in September 2018.  That’s 335%.  Wow!  Double wow!
  2. We have asymmetric feelings.  The pain of losing $1 is worse than the joy of making $1.

The problem with recency bias is it prevents us from seeing the big picture.  We ignore a 335% increase in the S&P 500 and, instead, focus on the 19% drop over the past 6 weeks.

The problem with asymmetric feelings is we ignore Aristotle’s axiom “A is A.”  $1 = $1.  It’s a mathematical certainty.  Good luck trying to disprove that.

So while the nervous are busy locking in losses at artificially low prices and waiting for the “all clear” signal to get back in (buy high, sell low!) the disciplined money is busy strategically building out the equity portion of portfolios.  Remember, slow and steady wins the race – always.

Think it’s a bad time to be buying?  Consider this.