Stock Market Fell Hard Yesterday and Will Probably Go Up Today ... Daily Stock Market Gyrations ... What To Do? ... Nothing

The stock market tanked yesterday. Thus, it probably will go up today. Or it may go down again. It most likely won't tread water and stay unchanged.

Then it's on to tomorrow, next week, next month, next quarter, next year and so on.

Here's some good advice for the average long term investor to follow --- don't watch if it makes you nervous when prices fluctuate or upsets you when the market falls precipitously.

What You Don't Know About Your Portfolio May Help You has sound advice worth heeding:

"Back in 2008, a friend of mine left for a two-week trek in Nepal. While he was gone, the entire financial world exploded. . . .

But here’s the interesting part: he didn’t know anything happened because he didn’t have any connection to the outside world. Although recently retired from the investment industry, my friend would have been glued to his computer. But he had no idea what was going on.

Think about that for a minute. I remember those days. I remember waiting up to see how markets opened in Japan. I remember being so worried that I didn’t sleep for days. And I remember another friend who called me from a cruise ship to ask if things were O.K. He said that many other passengers got off at the first port and flew home to deal with what was happening in the market.

My friend in Nepal missed it all, and it didn’t make one bit of difference. He was actually better off.  All my worrying didn’t change one thing.

In fact, my friend said that when he got back and eventually heard the news, something became crystal clear. He knew exactly what was going to happen for the rest of his life: the markets were either going to move up and then down, and then up and down again — and then he would die. Or, they would go down and up and down and up — and then he would die.

In either scenario, he was still dead. And no amount of obsessing over the stock market would change that.

This idea of being unconnected for a few weeks reminded me of Warren Buffett’s statement: “Benign neglect, bordering on sloth, remains the hallmark of our investment process.”

But it’s still so hard to ignore the market because we’re so connected. We seem to be obsessed with economic news. I’m not sure when exactly it happened, but sometime in the 1990s investing became America’s favorite spectator sport. I knew there was a problem while sitting in my dentist’s office and seeing CNBC on the TV in the lobby. It’s only become more difficult to avoid, now that everyone has a smartphone.

But knowing doesn’t help. And much of the time, it actually hurts. Aside from the tendency to trade too much when we’re following every market move, there’s also the issue of our happiness. It doesn’t feel good when our investments go down, even if it’s just for one day.

We have an aversion to loss. In other words, you’re likely to feel the pain of loss far more acutely than the joy of an investment gain. We feel twice as bad losing money as we do making money. And yet, knowing this, we continue to do things that will cause us pain.

Since many of us use the Standard & Poor’s 500-stock index as a proxy for the market, let’s take a look at the period from 1950 to 2012 to see how often we’re likely to feel positive, based on how often we check our investments:

• If you checked daily, it would be positive 52.8 percent of the time.
• If you checked monthly, it would be positive 63.1 percent of the time.
• If you checked quarterly, it would be positive 68.7 percent of the time.
• If you checked annually, it would be positive 77.8 percent of the time.

So here’s the thing to ask yourself. Other than upsetting yourself half of the time, what good is it doing you to look anyway? . . .

So along with your do-nothing streak, let’s see how long you can go without looking at your investments (assuming you’re in a low-cost, diversified portfolio, of course). I think you’ll discover that it makes you happier, keeps you from doing something stupid and helps you become a more successful investor."

Summing Up

Stock market watching on a daily basis may be a nice hobby. I admit to doing it myself.

That said, it's not a healthy or necessary thing to do for  an individual investor, however, if the market gyrations cause that individual considerable anguish, which down days often do.

This year has been pretty much straight up so far. As they say, what goes up must come down. At least occasionally and for the "reversion to the mean" adjustment period.

So here's what I say about the market and monitoring its daily movements, including yesterday's.

Relax and enjoy the summer.

At the end of this and next year, stock prices are likely to be considerably higher than today's levels.

And ten years from now, the stock market almost certainly will be at much higher levels, and probably twice as high as today.

One hundred years from now, what difference does it make?

Thanks. Bob.