I have one client in particular whom I expect will call me soon to complain about the bad quarter we are closing today. I imagine I will agree with him it was a bad quarter. Then I will tell him we are going to have quarters like these. I will remind him that the stock market has a down year 28% of the time, according to the Stock Trader’s Almanac. I will further remind him that when I first started managing money for him I promised him there would be down quarters and down years and this is what they feel like.
Then he will pick out one name that he thinks is down a lot and ask if we should sell it. Whatever name he picks will be down in a similar fashion to its competitors and I will ask him if we sell that one what should we do? Buy a substitute that I don’t think is as good of a company?
Next he will ask if we should have more money in preferred stocks, we already have a lot given his conservative allocation, he will ask what’s wrong with getting 6% on the whole thing? I will remind him that the market goes up a lot only so often and we don’t want to miss too much of it, like we did in 2003. He was afraid of stocks at precisely the wrong time.
The next time we have an up quarter he will question why we are not exposed to more technology.
I am not making this up. While I doubt too many of you are this guy, how many of you have a little bit of him in you? While I wish this had been a good quarter, it wasn’t. If you can really embrace the fact that this is how it works and that no emotion can alter that fact it will make the ups and downs much easier to deal with, I promise.