An article in the Washington Post offered a different perspective to the view that kids these days get too much screen time. There’s another demographic struggling to put down their devices: baby boomers. As one man put it: “My 75-year-old dad’s phone may as well be an implant; he lives with it like a teenager!”1 Of course, this has implications for our investing ways. With easy access at our fingertips, we may all be guilty of checking investment accounts too frequently. This summer, why not take a vacation from checking your portfolio? Here are some reasons why:
The more you check, the greater likelihood of seeing negative performance. History has shown that by checking the stock market daily, the chances of seeing a negative return are 46 percent. However, this reduces to 0 percent for 10-year rolling monthly returns. As the graph (right) reminds us, the longer you extend your time horizon, the better the chances of seeing positive returns.
Emotions can impact our investing decisions. Behavioural finance suggests that we feel losses twice as acutely as we feel gains of a similar size. “Myopic loss aversion” can occur when we react too hastily to avoid these losses, often making decisions that are not in our longer-term best interests. One important variable for investing success is how long you can stay invested. As Warren Buffett’s business partner Charlie Munger often says: “The big money is not in the buying or selling, but in the waiting.”
Investing often involves patience. When the S&P 500 Index hit a level of 4,200 in May (rising 20 percent from its October trough), some market pundits asked: Is this the start of a new bull market? While the S&P/TSX Composite hasn’t officially entered a bear market, the S&P 500 has been in a bear market since last year. Over the past 50 years, there have been six S&P 500 bear markets that lasted on average 15 months from peak to trough. In order to regain those losses, it took an average of 30 additional months.2 After the last bear market — the shortest ever at a mere 33 days during the pandemic — we may have been conditioned to believe the markets quickly rebound. Yet, enduring bear markets can often take time. The good news? Markets are cyclical: history reminds us that they’ve always recovered to reach new highs.
- www.washingtonpost.com/technology/2022/11/12/boomers-screentime/; 2. Based on: awealthofcommonsense.com/2023/03/why-the-stock-market-makes-you-feel-bad-all-the-time/
- www.washingtonpost.com/technology/2022/11/12/boomers-screentime/; 2. Based on: awealthofcommonsense.com/2023/03/why-the-stock-market-makes-you-feel-bad-all-the-time/
