I’ve been getting calls about “waiting for the correction” to buy-in to this market. Or “buying the dip.” It pains me to hear from everyday investors committing what is the most avoidable mistake.
The market has been beaten down in late-2018 (the S&P 500 is down 6% in the last 6 months). Are these same callers jumping in with both hands and feet? Or perhaps because the market was “off”, volatility has increased, they are feeling a little queasy.
As soon as we open that account summary in our brokerage accounts, immediately our emotions kick in. Emotions are telling us – “Is this it? Should I sell now and try to buy back in later? Should I try to hold through? Seems like I should do something!”
For those checking their brokerage accounts daily their mind can spiral.
Now, for those that haven’t checked their brokerage accounts in a few years but happened to log in recently for the first time, they are conversely reacting with significant pleasure (the December drop notwithstanding). “Wow! Look how much more money I had then a few years ago. I’m gonna let this sucker ride.”
What does this say about us as investors or more importantly, what does this say about as humans? It tells us we have natural emotional response mechanisms that are triggered without any control. With practice, they can be ignored, but not stopped.
Which is why for most people, it’s easiest to take emotion out of investing and trusting that the plan you develop will do the work for you. The details of that plan vary per investor, but the simple beauty is that it’s almost always some form of diversified asset allocation, marginally shaped by personal details.
The likelihood is that you never “beat the market” and you’re chasing unicorns by trying to time markets across asset classes. I would candidly surmise that those lay investors who self-characterize as market timers likely perform WORSE than those who have forgotten the password to their Fidelity accounts.
So do yourself a favor, stop trying to pretend that you have some system or instinct or hunch that will consistently (and that’s the key word here because hey, anyone can be right once in a row) outperform, and keep yourself from getting in the way of your own investment performance.
One form of diversification includes alternative assets. And that’s why we created Streitwise, so that both accredited and non-accredited investors have the option to access the commercial real estate market, one that does not exhibit the same volatility as the stock market in the short run, and may be part of a thoughtful, diversified portfolio in the long run.
Eliot Bencuya is the co-founder and CEO of Streitwise. Eliot has extensive experience identifying, underwriting, and executing value-add real estate investments.
Prior to forming Streitwise, he was a Vice President of Acquisitions for Canyon Capital Realty Advisors and the Canyon-Johnson Urban Funds, where he was responsible for originating, underwriting, structuring and executing transactions in the Pacific Northwest, Northern California and Midwest regions. Mr. Bencuya also held positions at Sovereign Investment Company (a subsidiary of the Marcus and Millichap Company) and the investment banking division of Merrill Lynch & Co. He holds a Bachelor of Arts degree in Economics and International Studies from Yale University, and a Masters of Business Administration degree from the Haas School of Business at the University of California, Berkeley. Mr. Bencuya is a member of ULI.