You know that The Money Principle is known for honesty and openness on all things money. Here you can read about our mistakes, our smart money moves and our outright silliness. So, you can believe me when I tell you that our investment return during the first week of 2018 is a cool 2%; and we are talking about three trading days during that week.
Okay. Approximately 0.8% of that is from my crypto currencies game, I’ll give you that. The rest (1.2%) is from honest, solid (as solid as you can get) investments in Vanguard index funds, Nutmeg investment basket and Scalable Capital.
Bet most investors have experienced crazy returns in the first week of January. This lucky streak continues – only yesterday our investment account (excluding cryptos) return 0.4%; not too shabby by anyone’s standards.
As tempting as it may be, I cannot take the credit for these returns and a genius investor I’m not. This is ‘the tide that raises all boats’ – e.g. this is the growth of the market.
Have you seen any headlines screaming that the market is having one of the best streaks in decades?
No, I didn’t think so. I certainly haven’t.
Which I do find surprising given that exactly a year ago media was screaming at us from all directions that
The stock market was having the worst start to the year ever!
Don’t believe me?
Check it out.
Market Watch told us about investment return:
“U.S. stocks closed sharply lower Friday, locking in the worst 10-day start to a calendar year ever, as oil prices plunged and investors worried about slowing growth in the U.S.”
At the same time, the Huffington Post had its knickers in a twist because:
“After falling 1.2 percent Thursday, the S&P 500 is down 10.54 percent in the first 28 days of trading. That’s the biggest fall to the start of the year ever, according to Bespoke Investment Group, an independent research firm. Previously, the biggest decline over the first 28 days of trading was the 9.22 percent fall at the start of 1948.”
Thing were not looking any brighter on this side of the pond where The Telegraph informed us that the FTSE has had the worst investment return at the start of the year in 16 years.
You see, we all heard about that!
Well, good news is never enough news in today’s world, I suppose.
Having accepted this, please note the lesson:
Don’t listen to the media. They are not writing to inform and educate, they write to sell and bring clicks. Fear is a much more powerful vehicle for that than cheerful optimism.
Don’t listen to the media. They don’t have your best interest at heart – this is your job. And if you do your job right, you’d learn about investing from reliable sources.
Now, let me tell you why this return so early in the year is, in fact, good very good news indeed.
The obvious one is that such investment return feels good. Watching our investing accounts grow substantially every day, felt so good that I didn’t shout at my son even once in the days of the winning streak.
Only a dummy would think this will continue and a dummy I’m not. I’ve been in this game long enough to know that the market will correct.
What I also know, and this is the best of it, is that big stock market returns are usually made on very few exceptional trading days. It is also true that there are several worst trading days. Hence, in theory, if one manages to time the market and catch the best while avoiding the worst…well, sky is the limit and you wake up from a beautiful dream.
Timing the market is impossible.
Having great trading days so early in the year, however, is good news. Which, naturally, doesn’t mean that there won’t be bad days or that the bad won’t exceed the good. As a friend of mine says, ‘this sh*t is witchcraft’.
The lesson here is that if you are a serious investor, you should celebrate a great, winning stock market streak. Still, be prepared to take the losing streak that may follow without panic. Stay the distance – in the long run, the stock market, history tells us, usually sorts itself out.