After sketching this crude drawing on the back of a napkin, my hunch is that you are annoyed the stock market isn’t moving past the C dot. Everyone experiences this at some point or another.
We all like that ride from the dot in the lower left corner to dot A.
The A dot is where you feel good; money is being made. The A dot is when you see your brokerage account statement each month and smile.
Being the free market capitalist that you are, you want that ride to continue. Time goes on and eventually you find yourself at dot B. Yes!
But then something happens. Something you haven’t experienced in some time. You start to go backwards. Surely this is just an anomaly that you will soon return you to the B dot. It isn’t. Instead you find yourself at C. Major bummer.
The C dot hurts. It’s uncomfortable. And it’s where undisciplined investors bail out. They change their investment strategy to something that instantly makes them feel better or to something they hope returns immediately to B – most often both lead to poorer results.
So here you stand today at dot C. It’s a difficult job to hang tight. On one hand you see your peers bolting for the sidelines where their money is now earning less than inflation. But on the other your patience is wearing thin.
You wonder: When the heck will we see that breakout rally?
In doing so, you realize that you are only looking at a partial version of the chart. The Big Picture version looks more like this:
Here you discover the C dot is the worst possible place to quit - especially when you take into account what often follows.
REALITY CHECK: To get to the D dot you must first endure the C dot, which right now is feeling awfully crummy and is never a fun place to be.
The path to D is not linear and rarely pain-free. If it were, people with more brain power than you and I would have figured it out by now. Sorry. The best way I know of to get there is time, discipline, and knowledge even though the high-voltage Wall Street egos would have you think otherwise.
The market is still a yo-yo climbing a flight of stairs. Sooner or later, you must come to terms with this fact.
One day later down the road when you look over your shoulder at history, my bet is that you will see this as a short-term blip. Chances are good that you will be kicking yourself for having not taken advantage.
Though it’s easier said than done when the panicky chorus of doom-and-gloom is surrounding you.
One last thing to point out - see what happens after the D dot? Will you be ready? As the saying goes, “Forewarned is forearmed.”
