Thinking long-term about stock - opinion

Age is a case of mind over matter, if you don't mind then it doesn't matter-Satchel Paige

 Worshippers wearing facemasks with rabbit faces make offerings of incense sticks at lunar new year (photo credit: TYRONE SIU/ REUTERS)
Worshippers wearing facemasks with rabbit faces make offerings of incense sticks at lunar new year
(photo credit: TYRONE SIU/ REUTERS)

It’s birthday season in our family. This week my father turned 93 and my dear wife turned 29 again (they should both live and be well until 120 – though it’s hard to get there when you get stuck at 29!). For some, a birthday is a day of fear. It means one year older. For others – like my father – it’s just another day. Whenever I would call him to wish him a happy birthday, I would ask him how he feels, and he would reply, “I feel no different today than I felt yesterday.” Age is the cumulative effect of day after day adding up to another year. It’s a daily process.

Exodus

In this week’s Torah portion, we continue to read about the exodus from Egypt. “They baked the dough that they took out of Egypt into unleavened cakes, for they could not be leavened, for they were driven from Egypt for they could not delay nor had they made provisions for themselves.” [Exodus 12:39].

Rabbi Yissachor Frand asks, “Furthermore, we might ask, why did not they have a little foresight? We spend weeks preparing for Passover. They didn’t have any cleaning to worry about. Moshe told them ahead of time they were leaving Egypt the next day. They should have packed up and prepared provisions. Why were they so rushed at the last minute that they did not have time to let their dough rise? What is the meaning of this?”

He answers, “The Jews expected to leave Egypt right after the plague of blood. They were packed, they had their provisions, and they were ready to go. The plague of blood came and went and there was no movement. Nothing happened. Again with the frogs, there was a ‘false alarm’ that they were about to leave. However, the status quo persisted after frogs and after each of the first nine plagues. By the time of the Plague of the First Born, people already did not believe that the end was imminent. They took an ‘I’ve been there, done that’ attitude and were not going to get caught yet again making provisions and having to unpack and unwrap the meals that they had prepared for the road.”

They did not pack. They did not prepare. They did not bake. They did not believe. They were so depressed and so helpless as a result of the roller coaster of emotions they had been through during the previous nine plagues that they did not expect to leave when they did.

A Hula painted frog GALLERY (R) (credit: REUTERS/Nir Elias)A Hula painted frog GALLERY (R) (credit: REUTERS/Nir Elias)

The lesson of the Exodus is that the salvation of God can come in the blink of an eye. It could be that yesterday the odds against it happening appeared astronomical, but today it might yet happen.

The market

I know that I sound like a broken record but for investors, time in the market is much more important than timing the market. After a year of big market losses, experts were almost unanimous that the first half of 2023 was going to stink as well. “Wait for the second half before investing” was the mantra just three to four weeks ago.

Well, a strong first four weeks of the year, has created a quandary for investors who have been out of the market and watched a 6-10% jump in a very short time. Should they heed the advice of conventional wisdom and stay in, cash out, or jump into the market?

A few years ago, I mentioned Humphrey Thomas, CEO of HG Thomas Wealth Management, who wrote “Longer-term approaches are a better strategy. JP Morgan compiled some research showing the importance of this. They tracked the performance of a $10,000 investment in the S&P 500 over a 20-year period.

It showed a healthy average return of 9.85% per year. But they modeled what would happen if the investor withdrew from the market temporarily and missed the 10 biggest days on the stock market for that 20-year period (just 10 days out of 7,304). The result was a reduced return from 9.85% to 6.1%, which means a decrease of $32,665 in gains. And the more days missed, the lower the gains fell.”

Thomas then continues and brings an incredible statistic. “Nobel laureate William Sharpe found that “market timers” must be right an incredible 82% of the time just to match the returns realized by buy-and-hold investors.”

The 82% hit rate is virtually impossible to accomplish. If most professionals can’t even come close to that kind of success rate then a retail investor has almost no chance.

Trust the process and the daily grind of investing. Salvation or very strong market up-days can come when least expected. The tried and tested way to make money in the market is to be in it for the long term. Before investing figure out your goals and needs and then create a portfolio that will enable you to achieve whatever it is that you are trying to accomplish financially. Then allocate the money accordingly which will help you manage risk and ease the market roller coaster.

Happy birthday!

The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.

Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@lighthousecapital.co.il