The power of negative thinking

[FrugalToque]

We recently suffered the revival of an old thread due to a necro-posting spammer.

The thread was neat, however, in that it mentioned about a moment a year ago when numerous experts assured us the market would collapse the next day.  (We also have a tongue-in-cheek "The Top Is In" thread which is facetiously maintained by the horde on a daily basis).

And yet, here we are, a year and some days later, well ahead in our investing goals if we kept our heads together.

To wit, I also have acquaintances (IRL humans with whom I communicate) who have kept their money out of the market for years.  They feel that the market is untrustworthy ever since (we're in Canada) the Liberals came into government or the electricity rates went up or the Something-Something Scandal.  So they've been keeping their money in 2% money market funds to protect it (from what?  inflation?  Just barely.)

So I sent the two of them a copy of the Vanguard Canada Index funds for the last five years.  Like, dude, things are fine.  You shouldn't let the fear-mongering amongst your (angry? political?) Facebook friends prevent you from learning and applying facts to your life decisions.

Crazy.

Toque.

[MustacheAndaHalf]

Can you encourage them to think outside Canada?  Most people would greatly benefit from a higher allocation to international.  Then again, the people you know who are sitting in cash could benefit by throwing a dart at a list of mutual funds and investing in whatever they hit.  No worse - throw 3 darts, take the worst fund, and it's still better than cash.

What if you show them how long they have to work and save with cash, versus work and save with equities?

[FrugalToque]

Can you encourage them to think outside Canada?  Most people would greatly benefit from a higher allocation to international.  Then again, the people you know who are sitting in cash could benefit by throwing a dart at a list of mutual funds and investing in whatever they hit.  No worse - throw 3 darts, take the worst fund, and it's still better than cash.

What if you show them how long they have to work and save with cash, versus work and save with equities?

I haven't talked to them since I sent them the index and explained that, once you add the dividends in, you get 6.72% annually over the past 7 years.

It'd be interesting to see if either of them have changed their minds in the last five months.

Also, true, nothing wrong with an international mix.  At the time, I was looking at the narrow question of "You can't trust the TSE because of <random political thing currently in the news>".

Toque.

[NVDee]

Around the time I learned everything about index investing, I chatted with a coworker who was pissed at the safe bond fund he was sold by our employers RSP 'advisor' because he didn't like the risk of 2008 stock market.   The bond fund had lost a few %, but I'm willing to bet that was price lost but before distributions.   

 So he then started buying marijane startups in his TFSA, and now he even works in weed manufacturing!

Education is power.    We are globally diversified, which I tried to convince him of, he even still has my Couch Potato softcover book.

[ChpBstrd]

Since the 1990’s there has been a sort of musical chairs pattern in the stock market. Several years of massive share price growth has repeatedly been followed by a collapse that takes several more years to recover from - longer for those living off their investments. Investors are understandably gun shy. They face the same gamble in 2020 as they faced in 2006 or 1998. Will the market go up 30% next year or down 30%? Will they get an opportunity to buy in cheaper within the next year or three? Their retirement seems to hang in the balance. And then they read stories like this, which seems to present a lot of facts suggesting that a defensive strategy will prevail in the next couple of years.

https://www.crescat.net/bear-market-looms/

But the market can remain irrational longer than most of us can keep ourselves out of it. Meanwhile the perma bears continue to fall so much further behind every day that a bigger and bigger correction that is less and less likely is required to prove them right. They’ll be right someday, but the market may not fall far enough for them to buy back in at a profit.

My strategy to sleep well at night involves hedging.

[FireLane]

A lot of world events in the last few years have made me worried or pessimistic, but I ignored my emotions and kept my money invested, and I'm glad I did. I'm much richer than I would have been if I'd given in to fear. If you'd asked me in 2009 or 2016, I would never have imagined that this bull market would last as long as it has.

No matter how strongly felt they are or how subjectively convincing they seem, your emotions are a poor guide to what the future holds. Nobody knows what's going to happen, so you should always go with the statistically best course of action, which is that that time in the market always beats timing the market.