Keep calm and carry on.
For many individual investors, it is more than a meme or message on a T-shirt. It has become a way of life.
With U.S. stocks down more than 14% so far in 2022 and the overall bond market down nearly 9%, I asked non-professional investors this week how they’re coping with the collapse.
Wall Street views individual investors as a bunch of nave, unrealistic optimists who chase hot performances in good times and run away from stocks at the first sign of trouble.
Talk to real people and you quickly realize it’s a ridiculous caricature.
Instead, many Main Street investors are methodical and thoughtful. Their experience with the ups and downs of the market has made them tougher, just as steel is made stronger by tempering by heating and cooling.
Consider the aptly named Lyle Steelman, 43, a trumpeter for the Cleveland Orchestra. He began investing in 2009, after the end of the global financial crisis.
A few years ago, he bought two wooden figurines of a bull and a bear for about $5 each. He uses them intentionally as props, to “turn everything around” and “protect my portfolio from me,” he says.
“I Know When I See Red” [as stock prices fall]If I let my emotions take over, I’m going to stop the process,” says Mr. Steelman. “So I put the bull next to my computer to remind me when things are going downhill in no time. If so, it’s an opportunity to make more money in the long run.”
Conversely, “I get that jolt of excitement when the market is going up, and I know I could be tempted to throw more money into it.” “Then I put the bear in there to remind me that future returns are likely to be low.”
Joy Bishop, 73, who lives near Sarasota, Fla., is a former owner of a small construction company. She keeps a meticulous investment diary to record her thinking.
When the stock is rising, she asks herself, “If the market was down 20% yesterday, what would I wish I had changed?”
Last November, near the peak of the bull market, he cut his stockholding by about 10%. Instead of chasing a hot performance, she backed out of it.
For Ms. Bishop, this year’s fall doesn’t feel like a disaster; She thinks this is an opportunity. With stocks falling, she is preparing to buy.
“I’m looking for some quality names that have gone on sale,” she says.
Paul Jacobs, 63, who lives near Austin, Texas, is a former senior financial manager in the energy industry. His experience in finance did not make him a businessman; Instead, he has used a spreadsheet to put his portfolio on autopilot.
This gives him what he calls “steady” peace of mind, no matter what the market does. “I focus on what I can control,” he says.
Mr. Jacobs owns a handful of exchange-traded funds that mimic the investment risk of a Vanguard target-retirement portfolio.
When the asset moves up or down sharply, it rebalances to restore its holdings to a predetermined ratio by selling what has gone up and buying what has gone down.
In mid-May, he sold some of his short-term inflation-protected bond fund and bought stocks and traditional bonds.
The process is so automated that it “allows me to ignore the daily noise and take action only when necessary,” says Mr. Jacobs.
Jim Woods, 68, an orthodontist in Paduka, Ky., prefers individual stocks over mutual funds or ETFs.
He makes Warren Buffett look like a day trader. Dr. Woods held a stock, Paduka-based Computer Services Inc., for 42 years. is kept; He was Apple Inc. for a quarter century. has organized.
The fall in prices has caused Dr. Woods to increase his existing holdings, and is buying new ones.
“I have become accustomed to overreacting to the ups and downs of the market,” he says. “Trading doesn’t make sense to me. I’ve pretty much made up my mind that I never really intend to sell. Any of these stocks.”
In 2021, newly minted online traders rocketed to momentary fame and fortune as stocks such as AMC Entertainment Holdings Inc. and Gamestop Corp. took huge gains and then fell to earth.
His often reckless behavior drew ridicule on Wall Street (even if the professionals failed to keep up with the amateurs).
However, the itchy thrill-seekers weren’t the typical individual investor. They were highly outsiders, the outbreak of a pandemic that sidelined them with stimulus checks to burn at home.
The people I talked to may also be unusual. They all subscribe to my newsletter, which seeks to take a long-term perspective on the markets.
The general public is more fickle—though not nearly as fickle as Wall Street thinks it is. According to the Investment Company Institute, since March 31, investors have taken in more than $51 billion from stock mutual funds and ETFs. That sounds like a lot, but it accounts for less than a third of the 1% of total assets in a stock fund.
In the horrific bear market of the 1970s, individuals slowly abandoned stocks year after year, as if they were fleeing a sinking fleet of ships.
Could this ever happen again? This can happen. But it will take much longer than this year’s decline to shake the determination of today’s investors.