|October 3, 2023|
Ease of Transacting – Good or Bad?
For as long as we can remember, a positive and pragmatic reason for investing in a portfolio of stocks is the extraordinary ease of buying or selling. As compared with almost all other investments, stocks are unique in this respect. For example, if one owns real estate whether an unimproved parcel of land or a rental property, it may involve finding a realtor, conducting a title search, finding a qualified buyer, and negotiating an equitable price. Normally this cannot be done rapidly.
By contrast, we can exchange our stocks for a fistful of cash in a few seconds with minor or inconsequential transactional costs. Investment advisors frequently point out the positives of the almost instant liquidity afforded by stocks. Truly, this is a positive feature, but in some circumstances, it can also be an Achilles’ heel.
Everyone else invested in the market has the same ease and efficiency of transacting. This means that either a sudden fear or a very positive incident will affect the emotions of every other investor, large or small. None of us are immune from the roller coaster feelings brought on by sudden changes. This could be a manager running a 10-billion-dollar mutual fund. Should he or she decide to sell ten percent over the next couple of days, then a billion dollars in sell orders would hit the market, it matters not the name of the stock.
The truly successful investors (and please believe us – they are out there), do not sell their stocks just because it is easily done. You do not grow a successful company in a few weeks, nor do you attempt to sell your assets, then buy them back a few dollars cheaper. This is why we ride through the unavoidable and inescapable declines in the in the market – as uncomfortable as it is. It is easy to make a fast decision to sell simply because the market drops, but very few will ever be correct with the timing on both the buy and sell.
“Far more money has been lost by investors trying to anticipate corrections, than lost in the corrections themselves.”1 -Peter Lynch
It is our job to continually monitor the individual companies in your portfolio, ferret out and reduce (or eliminate) those which concern us and replace them with investments which we believe hold promise for the future. Over many years, we have never seen a single case where indiscriminate dumping of equities due to fear or misguided prognostications resulted in long term positive results.
We continue to believe that the US is economically the strongest in the world and is likely to remain so for the foreseeable future. It is also our opinion that we remain in a long-term or secular bull market. Secular bull markets are known for their extended duration (the previous one lasting 18 years from 1982-2000). We believe this current secular bull market was entered in 2013 when the S&P 500 broke into new high territory (following a 12-year bear market range). Despite the overall upward trend secular bull markets do experience significant corrections along the way. These are temporary declines that are followed by a resumption of the upward trend. Investors in long-term bull markets prosper and experience substantial gains by simply staying the course.
Important: Steps to better protect your information
In today’s digital age the increase in cybercrimes is a concerning and ongoing trend that has been evolving over the past several years. We thought it would be beneficial to suggest a few best practices that can help protect you and your personal information.
We ask that you please reach out if you would like to discuss this or any other topic on your mind. On behalf of the Sara-Bay team we appreciate your continued trust.