There were two lessons yesterday. The first was about tax loss harvesting (see yesterday’s FZ Daily).
The second was why you shouldn’t pay attention to short-term fluctuations.
“Rip Van Winkle” is the best investment strategy
In case you don’t remember, Rip Van Winkle was the character in the short story by Washington Irving (of Sleepy Hollow fame).
A mysterious man gives him a special liquor that makes him fall asleep for 20 years (and miss the American Revolution).
When you Rip Van Winkle” it with your portfolio, you’ll win out in the long-term.
But if you pay attention to the short-term market fluctuations, you might do something rash in the moment and screw up a good thing.
Yesterday was a good example.
The market was down over 1100 points in mid-day trading…
…and then it finished UP 99 points.
I can all but guarantee A LOT of people (who don’t read FZ Daily) probably made some really bad trades yesterday and lost a lot of money.
They freaked out near the bottom, thinking they’d stop the pain and get back in after it dropped some more.
And then when the downtrend reversed they were caught with their pants down and either a) bought back higher than they sold it or b) prayed that another downturn happened today to get back in.
The best investment strategy is to invest in a well diversified portfolio of index funds and then “fall asleep” for 20 years.
Your investments are like soap. The more you touch them, the less you’ll have.
