Things People Say During a Market Correction
by Ben Carlson, A Wealth of Common Sense
In my younger days I used to get my haircut at an old school barber shop. It had the candy cane red and white pole outside and all. It was the kind of place where the barbers were more worried about the multiple conversations going on and joking around than sticking to a schedule and efficiently working their way through customers.
Basically every month when I would stroll in at my allotted time for a haircut my barber would be 15-20 minutes behind schedule. And every time he would give me the same exact line as I settled in to read old issues of Sports Illustrated while I waited (remember this was pre-cell phone days). Every single time he would say, “Hey Ben, the service is down today, but the quality is up.”
I didn’t mind because it was actually entertaining to listen to the back and forth discussions, but I always found it funny that I got the same line every time without fail. It was a well-rehearsed routine.
I’ve come to expect a similar outcome every time the stock market goes down, as well. Certain groups of investors, traders, advisors, members of the media or individuals will almost always go to their bread-and-butter lines during times of market stress. Some utilize hyperbole. Others are clueless (this is not necessarily a bad thing). Still others are eternally hopeful that the worst will soon be over.
Here are a few sayings you’re likely to hear when the stock market endures a correction:
Stay the course.
Think long-term.
Remember to buy stocks with good balance sheets and high dividend yields.
Avoid emerging markets until the dust settles.
We’re using this correction as a buying opportunity.
We’ve decided to lower our year-end market target.
Um, what’s going on here?
Where is the Fed when you need them?
I knew I should have sold last week.
Here’s what you need to do RGHT NOW with your portfolio.
We’re constructive on the markets long-term but see more near-term volatility.
Something’s gotta give here…
Like I was saying a few weeks ago…
Don’t say I didn’t warn you…
Is it time to panic?
Should I go with the 1987, 1929 or 1999 analogy today?
We’re seeing a lot of buying opportunities down here.
The carnage is not even close to being over.
I’ll buy when…
It could be worse, at least I don’t own…
I’ll sell when I’m back to even…
There’s still a ton of cash on the sidelines.
Don’t try to catch a falling knife.
Buy when there’s blood in the streets.
Cut your losses quickly.
The babies are being thrown out with the bath water. Now is the time to pounce.
Some of these statements are relatively useless, but others are actually good pieces of advice when used correctly. It’s just that any investment advice is completely worthless when it’s not used within the context of an actual plan or well-defined process. Trying to create a plan on the fly when markets are falling by mashing together a bunch of different tactics and sources of advice is a great way to make things even worse. And praying that stocks will rise in an uninterrupted fashion forever does not constitute a plan.
And although good advice is always important, when market volatility spikes, most advice gets thrown out the window as people start to run on pure adrenaline and emotions. Here’s what I said this morning following the craziness of the initial huge leg down in the markets:
Investors don't need advice on a day like today. They need a psychologist
— Ben Carlson (@awealthofcs) August 24, 2015
Every time we see a stock market correction we see a corresponding bull market in opinions about what investors should do. If you have a plan in place you should be able to almost immediately recognize which pieces of advice make sense for you and your situation. That’s the whole point of setting reasonable expectations ahead of time and allowing for a wide range of market outcomes.
These periods are never easy because the further markets drop, the noisier things tend to get. The volume seems to be getting louder by the day.
Further Reading:
Things People Say During a Bull Market
Get Ready for a Bull Market in Opinions
*Hat tip to @lhamtil and @michaelbatnick for some of the suggestions here.
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Copyright © Ben Carlson, A Wealth of Common Sense
