‘You Make Most Of Your Money In A Bear Market; You Just Don’t Realize It At The Time’

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Vitaliy Katsenelson, chief investment officer at Investment Management Associates in Denver, Colo, has written a nice opinion piece for MarketWatch entitled, “Surviving the coronavirus crash: ‘You make most of your money in a bear market; you just don’t realize it at the time’ .” Katsenelson’s first two paragraphs set the tone for the article:

With stock prices sinking fast, a client emailed me saying, “Your move, boss.” So here is our move: Especially in this coronavirus crash, we continue to seek out what we always look for globally — high-quality businesses that we can buy at a significant discount to fair value.

We are prepared for the possibility that every decision we make today will look wrong tomorrow, as we have no idea how long this market decline will continue. We are completely fine with that, as long as these decisions are proven right several years out.

You don’t have to time the market to make money in the market. In fact, timing the market is usually a losers game as the market often pushes your emotions to do exactly the wrong thing.

The quote in the title, “You make most of your money in a bear market; you just don’t realize it at the time.” comes from value investor Shelby Davis.

Investing or staying invested during a Bear Market is one of the disciplines that patient long-term investors have to learn. Money invested in a Bear Market often has the highest rate of return after several years.

Shelby Davis is also quoted to have said, “Invest for the long haul. Don’t get too greedy and don’t get too scared.”

Katsenelson quotes another article in his opinion piece which in turn quotes value investor Benjamin Graham:

Zweig offers advice gleaned from Benjamin Graham (the father of value investing): The primary reason many individuals fail as long-term investors, Graham said, is that “they pay too much attention to what the stock market is doing currently.”

Graham added: “The investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage.” Investors “would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.”

It would be interesting if stocks, like the home you live in, were not valued minute by minute throughout the day, but only valued when you wanted to list them for sale.

Stock prices change with an average volume of about one-third of one percent of the outstanding shares. On average, 99.63% of those holding a stock choose to continue holding that stock every day. Even when it feels like “everyone” is selling, everyone is probably less than 1%.

As Warren Buffett is quoted to have said, “The stock market is a device to transfer money from the impatient to the patient.”

Photo by Bence Balla-Schottner on Unsplash

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David John Marotta is the Founder and President of Marotta Wealth Management. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. In addition to his financial writing, David is a co-author of The Haunting of Bob Cratchit.