There are two broad categories of investors. There are optimists and there are pessimists. Some are always optimistic, and others are forever pessimistic. Both can be dangerous ways of thinking regarding the broad economy (the USA, international, global), a market sector (energy, banking, health care, etc) or about an investment (a stock, an ETF, a mutual fund, gold or a piece of real estate.) Some move from one camp to the other and back again. Some days they are bears and at other times they are bulls. I believe both views are troublesome because they assume things about the future you cannot assume.
If someone is always optimistic, it could be said that they are bullish. They think the over-all trends and the price momentum for their investment(s) will be upward. If someone is always bearish, they tend to think the sky will fall any time now. And when the market does fall, they will say, “see, I was right!” However, both have a real problem in that no one knows what a day will bring. The problem boils down to tomorrow. Tomorrow is a huge unknown in so many areas of life, including life itself. Tomorrow is an unknown in investing, employment, international conflict, violent weather, loss of health and relationships. The list is endless.
Proverbs 27:1 (ESV) “Do not boast about tomorrow, for you do not know what a day may bring.”
James 4:13-15 (ESV) “Come now, you who say, ‘Today or tomorrow we will go into such and such a town and spend a year there and trade and make a profit’— 14 yet you do not know what tomorrow will bring. What is your life? For you are a mist that appears for a little time and then vanishes. 15 Instead you ought to say, ‘If the Lord wills, we will live and do this or that.’”
What are we to do then? – There is another type of creature that is better than a bear or a bull for an investor’s thinking. That creature is the ant. The ant has something we call diligence. Diligence is careful, consistent and persistent work. The ant cares not about the current storm or the current bounty. The ant just keeps faithfully finding little bits of food and brings them home for future use. They wind up with abundance by simple forward motion and sticking to the task regardless of the next day’s events. Some ants are even farmers. They herd aphids and protect them. They collect the honeydew the aphids release. They do this year-after-year.
Proverbs 21:5 “The plans of the diligent lead surely to abundance, but everyone who is hasty comes only to poverty.”
So here is a suggestion for you as you watch the market bounce up or dive down: keep doing the work of investing. Pick quality investments that you can store for the winter months of the bear market. Whatever you do, don’t toss out the things you have gathered just because a bunch of bears are stomping around. At some point (and we never know where the turning point is) the bull will return. And when the bull returns, don’t change what you were doing. Be like the ant. Invest in ETF’s like DVY. Buy and hold and collect the dividends.
Terms to Know:
Bear Market – This is a slice of time when stock values are declining. Most investors during this time are pessimists. (The Vanguard Group defines a bear market as a price decline of 20% or more over at least a two-month period.)
Bull Market – This is the opposite of the bear market. It is a time of rising stock value, when many investors are optimistic.