14 Things the Market Does Not Care About

I wrote a piece for Bloomberg earlier this week about preparing in advance for the end of the bull market. I received an email from a reader who took umbrage with the fact that I said the bull market is now 8 years old. He made the case that the bull market didn’t really start until we breached the previous market highs (which didn’t occur until 2013).

I’m sure you could make the case that the current bull market has started or ended on a number of occasions. Was 2011 considered a bear market? How about late-2015 to early 2016? And when did the secular bear market that began in 2000 really come to an end?

After going through this exercise for a few minutes I slowly began to realize that it doesn’t really matter. The markets don’t care about labels. There’s no pre-set length of time for bull or bear markets. Nothing follows the same script a second time.

These debates can be intellectually stimulating for those of us who work in the markets but that’s about the only thing they’re good for. No one makes more money because they have the correct definition about what’s transpiring in the markets at any given moment.

This got me thinking about other things the markets don’t care about. Here’s my list:

Your cost basis on an investment. The market doesn’t care what you paid for a stock. You can wait all you want to try and break even but there are no guarantees that you’ll recoup your losses if you paid the wrong price.

The returns you need to hit your financial goals. High returns are not a given in the markets. The stock market isn’t always a convenient place that gives you exactly what you need when you need it.

When you retire or begin saving. In a perfect world, we would all start putting our money to work at the depths of a bear market and ride off into the sunset during a raging bull market. Unfortunately, the markets don’t care about your investing lifecycle or when you need to start spending down your portfolio or begin putting money away.

Your feelings. Emotions usually get in the way of investment success but the markets have no sympathy if you get too excited, nervous, scared or greedy about your holdings. Taking things too personal is a great way to make poor decisions when money is at stake.

The degree of difficulty. Making your strategy more complex does not automatically lead to better returns. There are no bonus points awarded for the degree of difficulty or level of sophistication.

Legendary investor quotes. Your favorite Warren Buffett or Paul Tudor Jones quote isn’t going to help you the next time we see a bear market.

How much time and effort you put into your investments. Trying harder doesn’t always lead to more success in the markets. In fact, for most people, trying harder will actually lead to worse results.

How successful you are. Success in other areas of life doesn’t always translate into success in the markets. Personalizing your successes can set you up for failure if you become too overconfident in your own abilities.

Your thoughts on the passive vs. active debate. The markets couldn’t care less how you define “passive” or “active” investing.

Arithmetic vs. logarithmic charts. The markets don’t care how you make them look in an Excel graph. Change the y-axis all you want but it’s not going to help you make more money.

Your political views. Markets are apolitical. They don’t care who you voted for, which cable news network you watch or what your ideological leanings are.

How much money you made on your last trade. Investors have a memory but the markets do not. One winning trade has no bearing on your future trades.

Your experience in the markets. Just because you’ve lived through a bear market or rising rate environment or Bitcoin bull market does not make you a better investor. It can help but experience can also be a crutch when you don’t understand that every cycle and market environment is different.

Whether you’re right or wrong. Being right is a magical feeling but the only thing that matters long-term is making a good or bad decision, not being right or wrong. People should worry less about being right and more about making money.

Further Reading:
This is Why You Need a Process

Now here’s what I’ve been reading lately:

 

Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.