I’m nervous, too! 🤮 [PART 2]

Greetings!

I was packing for my trip to Miami for FutureProof Citywide when I got a whole bunch of notifications on my phone.

Oil prices are surging, Asian markets are tumbling, and U.S. futures are pointing to a rough day of trading on Monday.

I’ve written a bit about geopolitics, oil prices, and market volatility. (Click those hyperlinks!) I’ll have more to say soon.

But in the meantime, let me share a passage from the last post I wrote for Business Insider back in February 2016 (Link):

Every major sell-off in history has been accompanied by a mix of economic concerns, monetary policy shifts, geopolitical tensions, or some other source of consternation that might make a rational person demand a higher premium for putting their capital at risk. The details are different each time. But structurally, it’s generally the same story: it’s risky out there.

Amid all this, one pattern has stood the test of time: stocks will go down a lot, but then they’ll go up a lot more.

This is not to totally downplay what’s going on in markets today. However, it’s funny how markets often rhyme.

On that note, I point you to a newsletter I sent out almost exactly a year ago. It’s got some timely stats. I’ve reprinted it below for your convenience.

Sam

MAR 10, 2025

Earlier today, I checked the balances on my rollover IRA and self-employed 401(K) plans.

I wish I hadn’t done that!

Sure, I follow the swings in the stock market literally every day. And I know history (and TKer Stock Market Truth No. 2) tells us big sell-offs are normal.

But what’s also normal is your stomach dropping after you see the dollar-denominated short-term paper losses in your portfolio, which you’ve been funding regularly for two decades.

Fortunately (thanks to TKer’s paid subscribers), I spend all day looking at the data. And even if I don’t have the precise stats off the top of my head, I know that:

• One-day declines of 1%-2% happen frequently.

• One-day sell-offs of more than 3% aren’t that unusual.

• Almost half of all days are down days.

• Extended pullbacks of 5% or greater happen multiple times an average year.

• The average year sees a max drawdown of 14%.

• Bear markets happen.

• AND IMPORTANTLY, timing the market is incredibly difficult to do in a way that beats holding through the volatility.

Yes, this sell-off can get worse. Also yes, it’s possible the market inflects upward from here.

But in the context of a thoughtful investment strategy that aims to capitalize on the long-term return opportunity offered by the stock market, trading in and out of short-term volatility risks doing irreversible damage to your upside. Or as Howard Marks once eloquently wrote:

Reducing market exposure through ill-conceived selling — and thus failing to participate fully in the markets’ positive long-term trend — is a cardinal sin in investing. That’s even more true of selling without reason things that have fallen, turning negative fluctuations into permanent losses and missing out on the miracle of long-term compounding.

As all the historical data teaches us, this big sell-off is what stock market investing is all about. The path to long-term riches in the stock market is riddled with stomach-churning volatility.

It’s why smart people agree that time in the market beats timing the market.

That said, it’s OK to have emotions. Just don’t let them near your stock portfolio.

–

More from TKer:

• It’s OK to have emotions — just don’t let them near your stock portfolio 📉

• BofA: ‘Q: Is it better to sell early or late? A: Neither.’ ⏰

• Why the stock market gets so much negative news coverage 📺

• Smart people agree that the best investing wisdom shares a common theme 🧐

• In the stock market, time pays ⏳

• Stomach-churning stock market sell-offs are normal🎢

• 10 truths about the stock market 📈