They all looked the same: dark suit, white shirt, red tie. They were all jumping from the same windows. “You make money when there is blood on Wall Street”. I don’t remember who said that, but this is definitely my favorite quote about the stock market. The best time to make money is when people are bleeding their portfolio away to get cheap GIC’s and bonds.
The human instinct of survival tells you that when it burns, you need to get away and fast. That was good enough when we were fighting with bones and arrows against Yaks and Mammoths. However, The TSX, the S&P 500, the Dow Jones and the Nasdaq are completely different beasts.
They can only hurt you if you are willing to hurt yourself. It’s the only type of beast that will never attack but only pretend.
Picture this: you are on the border of a cliff. There is about 300 feet before you get to the small river by jumping (that is considering you won’t hit a rock in the process). I am facing you and I tell that there are 20 marines with their guns pointing at you. They will make you a war prisoner and torture you until you die. So you basically have 2 options; you either jump or you get captured. Most people don’t even turn their back and they just jump…
Nobody told you to jump, you just though it would be better to take your chance in the river than facing 20 marines. What if those marines were there to rescue you? What if you jumped for nothing? One thing is for sure, once you have jumped, there is no turning back. If you sold your stocks and went to fixed income all the way, you will never know what the market truly have to offer.
The stock market is a psychotic personality and nobody knows when it will be high or down. However, the fear provoked by its fluctuations is 3 times stronger than the optimism created by good news on the stock market.
Some people are referring to the 1929 crisis these days. They might be wrong, they might be right. The only thing I know is that when the market jumped back, people that were invested fully in stocks were making 30 to 50% returns for several years in a row. I wonder what was the GIC’s yield during the same period? Do you think those people got their money back? Even if they still live today, I doubt they got everything back yet!
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