There are plenty of stories out today about the one-year anniversary of the bull market, and in one sense we'd like to simply ignore it, because we often emphasize that investors should focus on businesses rather than markets (see here for instance).
However, the return of March 9 -- the day that marked the pit of the most ferocious bear market in nearly seventy years -- is a good day to actually re-emphasize that very lesson.
There are plenty of investors who, stunned by the precipitous drops in the market, were ready to jump off at the absolute bottom of the ride -- and many who actually did. We ourselves know of some whom we "talked back from the edge" and of others who actually sold their portfolios, following the (awful) advice of their "financial advisors" (now their former financial advisors) in March of 2009.
We have written a series of articles about the Dalbar studies that show this same deadly pattern destroying investor returns over and over -- and noted that the Dalbar data implicates "financial advisors" as part of the problem (see here and here).
The advice of focusing on the underlying business rather than the market helped investors during those dark days of March, 2009 -- because (as we have written many times) the panic of 2008 and 2009 was primarily a financial panic caused by Wall Street-specific issues, and those who owned shares of good, well-run businesses did not need to sell them at fire-sale prices because of the happenings on Wall Street, as we explained in this post.
We are not just saying this with 20-20 hindsight, either. On March 2, 2009, for example, we wrote an important post entitled "Don't get off the train" which cautioned investors against stepping out of the market and being left behind.
Now that things have gotten better, and investors can view the dark days of last year from a bit of a distance, it is important to revisit these lessons, and resolve to focus on businesses and less on the twists and turns of the markets, bear or bull.
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For later posts dealing with this same subject, see also:
- "Great minds think alike!" 03/19/2010.
- "Market-timing and train-timing" 05/25/2010.
- "Be centered, be still -- 2011" 03/17/2011.