For many of us, investing may be something of a quasi-athletic activity.
Think about it: If you have a bad day in the market, you needn’t wait a week or more for another chance to score. Participants are pretty much immune to injuries — except, of course, to your psyche or your wallet. But if you make a reasonable number of correct moves, you can be paid rather nicely. And you needn’t be right even half the time to be highly successful.
Indeed, the revered Oracle of Omaha, Warren Buffett, observed during one of his closely watched Berkshire Hathaway annual meetings that over the years he’s owned 400 to 500 stocks, but he’d made most of his money on about 10 of them. Just recently he managed to have his company’s considerable holdings cut by more than $800 million before lunch one day, following a report by longtime technology icon IBM that in the first period of the year it’d recorded its 20th straight quarterly revenue slide.
That, however, was chicken feed compared to Berkshire’s losses a few years ago, following the oracle’s decision to load up on “Big Oil” stocks, just before crude prices plunged more than 50 percent in a matter of months.
It’s obvious that his most highly profitable stocks have far more than compensated for Buffett’s occasional investment pratfalls, which has enhanced his ability to remain upright in the face of volatility in both individual stock prices and the various market indexes.
Living with volatility
Volatility is easily the scourge of much of the investing public’s staying power in the markets. However, my former Motley Fool columnist and analyst colleague Morgan Housel placed that issue in a reasonable perspective recently when he wrote, “A broad index of U.S. stocks increased 2,000-fold between 1928 and 2013, but lost at least 20 percent of its value 20 times during that period. People would be less scared of volatility if they knew how common it was.”
These days, economic concerns and uncertainties have induced more than the usual amount of concerns about the market’s intermediate- and long-term directions, along with the potential for extreme volatility.
As you may have noticed, many investors attempt to measure almost anything that’s quantifiable — up to and including the year-over-year changes in the sizes of bananas from India — in an effort to outsmart and outperform peers. Today, an area of increasing attention involves overall trends of economic news, with a bias toward negativity seen as signaling a potentially emerging market correction.
Post-election quandary
For a number of weeks following the Nov. 8 presidential election, the markets were driven steadily skyward by those who viewed its outcome as distinctly positive. More recently, however, some of the economic information that’s been imparted has been slightly less encouraging.
For example, a scant 98,000 new jobs were created in March, versus consensus expectations of nearly twice that many. Similarly, even a revised gross domestic product growth figure of 2.1 percent in the fourth quarter of 2016 was far less than inspiring.
Add to those metrics the mounting concerns about the possible timing of a repeal and replacement of the Affordable Care Act and the imposition of major tax reform.
Conversely, however, consumer confidence measures for March reached their highest level since way back in December 2000. The significance there? Consumer shopping accounts for about 70 percent of our nation’s GDP. The remainder is tied to a more sluggish combination of business investment and government spending.
A few pointers
So what, given this current array of circumstances, is a wise investor to do these days? A few suggestions:
Invest in stocks, not in the market. Get to know the companies you’re targeting for your portfolio as well as you possibly can. The market will more often than not bounce around and send out streams of false signals. Solid companies with strong management teams will eventually plant a smile on your face.
Don’t attempt to run a 100-yard dash in two seconds. Investor patience is now far more important for sound investment performance than ever before.
Take the proclamations of the market wizards you see on television or hear on the radio with enough salt to make your cardiologist blanch.
Enjoy yourself. You’ll have at least your share of investing bogeys and double-bogeys, but they shouldn’t ever lead to a boost your blood pressure.
