You're Not an Ostrich

Being an investor “back in the day” was a different experience than today.

Before the dawn of the internet, you opened an account with physical forms and a wet signature. From there, you wrote a check to contribute to the new account. And then a broker would place trade tickets to purchase your desired investments.

Frankly, none of that is terribly foreign to investors now. What has really changed over the last few decades is access to your account and its performance.

Back in the day, you received a printed statement in the mail each quarter, if you were lucky, and oftentimes just once a year. It must have felt like Christmas when those statements arrived – either it was a present or a lump of coal – because you had no great way of knowing how your account performed since your last statement appeared in your mailbox.

Everything is different today. Investors now have instant access to their performance every day the markets are open. It started with online accounts and was supercharged with the advent of mobile apps. You can now watch second by second, tick by tick, the gyrations of your investment portfolio.

There’s nothing inherently wrong with that level of access. Some people, however, struggle with it. Because they see the ups – and particularly the downs – and because they can now do something about it – trading at your fingertips! – they decide doing something is better than doing nothing.

Nearly always, though, that’s exactly opposite of what you should do as an investor. Sitting on your hands is usually a sensible strategy.

As a result, some financial advisors have determined that investors should avoid looking at their account values. They employ the mantra, “Don’t peek!” At the extreme, some have said, “Open an investment account, contribute to it regularly, but otherwise forget about it until retirement.”

I get the sentiment. But I disagree.

Seeing your account drop in value helps season you as an investor. By holding on through the valleys, you grow accustomed to the waves of investment performance over time. You witness firsthand that those movements are recurring and natural, not something to be feared.

As the saying goes, history doesn’t repeat but it rhymes. The more surprising events that you encounter as an investor the more confidence you should have in believing those drops in value are truly fleeting. Markets heal more easily than we give them credit.

Bear in mind, the U.S. stock market has endured staggering body blows in the past. It’s been on the ropes plenty of times. But it always bounces back.

The market has survived world wars, high inflation periods, economic crashes, U.S. presidents being ousted and assassinated, oil shocks, pandemics, accounting scandals, bank failures, technology bubbles, housing crashes, and numerous other events that seemed life-altering at the time. In the end, they all became blips to the U.S. stock market grinding ever higher.

These events all initially dinged the values of investors’ accounts – in some instances, severely dented them – but ultimately proved matchless to the power of the markets. Anyone who sold their investments as a result of those dire events regretted it in the end.

I think there is value in witnessing those twists and turns of the market. There’s no need to hide from tough times. Assuming your portfolio is already in a good mix of stocks and bonds, you don’t need to make investment changes based on market movements.

Your general aim as an investor should be to bury your toes in the sand, not your head. You’re not an ostrich. The surest way to achieve that is to be watchful and to learn from past events, which means remaining invested, through thick and thin.