I’ve been burned by my investment timing in the last year. I invested at the peak, and then it just fell, fell, fell.
The market has recovered some recently, and that’s been great.
But here is what the overall market looks like:
We have a steady rise through the 1980s and 1990s. This is the period everybody celebrates.
Then we have:
- The Internet Bubble Burst in 2000
- The Housing Bubble Burst in 2008
- The Chinese Bubble Burst in early 2016.
Nice 8 year cycle right? Now, obviously the market is still high. Almost at its all time peak. But what’s the likelihood that it falls dramatically before rising again for the next 8 year cycle? What impact will the next fall have on housing prices?
Since the overall market isn’t predictable… maybe the better strategy is to invest most all my money in starting a business. If the business does well and I have some extra, I can choose when I think stocks are cheap and invest accordingly. Otherwise, just invest it back into the business. Have something I can control that’s disconnected from the market.
All the stock market books tell you to just buy the index and hold, and even though it might take 10 years to come back, you’ll have excellent 30 year chances of getting the best possible return on your money. That strategy would be a lot more appealing if I didn’t have uses for this money in the ~5 year area. Buying a house in a different state. Needing startup capital for a business. Etc.
Also, if I sell and I don’t own the stocks, I don’t get any dividends. Dividends are a real return! I suppose one could argue that what really matters is the total return, value and dividends, and if the value falls so far relative to the dividend, then what does it even matter? Fair enough.
This morning I was thinking about how much more profitable it is for the person to put their money close to the place where value is created. When it’s filtered through fund managers and the stock market – yes, it’s profitable – but you’ll never be Bill Gates investing in the stock market average. Of course, it’s also risky if the value isn’t apparent to other people ;-).
Here’s a 1 year of my investments and of the S&P 500:
The investments include me shoving lots of saving into it. There is some similarity. The big August 25 S&P 500 drop only looks less apparent in my holdings because (cash) withdrawals to pay down my mortgage are combined with the early 2016 China drop… basically it’s an illusion. If you consider my portfolio and ignore the emergency fund part of it, it looks a lot like the S&P 500, just shittier.
Okay… I guess today is the day I’m opening a Vanguard account. There’s no evidence this is going to get any better.