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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

Now is not the time to do anything stupid

By Morgan Housel





Avoid doing so by understanding the history of average market returns versus average investor returns


JewishWorldReview.com | March 2000 was one of the worst times in history to buy stocks. Depending on how you calculate it, it may have been the single worst time ever, actually.

It was the peak of the dot-com bubble, when the P/E ratio on the S&P 500 was more than double its long-term average. Stocks soon crashed almost 50 percent, recovered and crashed again in 2008.

But "this too shall pass," as the saying goes. And it did. Someone who bought the S&P 500 in March 2000 and held through today has earned a 61-percent return on investment, including dividends. Not a king's ransom, but not bad, either -- about double the rate of inflation.

But we know the average stock investor hasn't earned anywhere near 61 percent since March 2000. Using money-flow data from Dalbar, with an estimate of returns earned year to date, the average individual stock investor has likely earned a total return of roughly 19 percent in that time.

The average investor has underperformed our idiot friend who bought at the peak and held on tight, because the average investor is constantly attempting to time the market, bailing out when he or she think losses are ahead, and piling in when thinking gains are due -- always at precisely the wrong times. That constant fidgeting and temptation to "do something" leads this investor to bad behavior over and over again.

Keep this in mind, because with stocks at all-time highs, more smart investors are asking if stocks are overvalued and due for a crash. Take these headlines from the last week:

"The Fed-Induced Stock Market Bubble Continues"

"'Definitely a bubble brewing' in stock market: Pro"

"Tech Stocks: A Bubble Just Waiting to Burst?"

People were saying the same thing about stocks three years ago, but let's assume these headlines are right and a new crash is right around the corner.

What should investors do?



If you understand the history of average market returns versus average investor returns, I think your answer has to be, "nothing different." Buy good companies. Diversify. Rebalance once in a while. Hang out with your kids. But nothing stupid.

Stocks will crash again someday. That's the short-term price you pay for superior long-term returns. But there is no evidence that trying to predict and avoid those crashes can help your long-term returns. People just can't do it consistently, and they end up shredding their long-term returns in the process. The biggest market gains over time accrue to those who are the most patient, not those who try to be the smartest.


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There's something else odd here. While stocks are up big since 2009, they have barely kept up with inflation over the last six years. Why are so many professional investors convinced we're in a new exuberant bubble? Investor Eddy Elfenbein had a great tweet the other day that helps explain it: "A bubble is a bull market in which you don't have a position."

While the S&P 500 gained 29 percent from 2008 through January 2013, the average equity hedge fund was up less than 9 percent. Professional money managers have, on average, been humiliated by the market over the last five years. Why? Likely because they've been anticipating another financial crisis, waiting in cash and bonds and being disastrously wrong in the process. No money managers want to go to their investors and say they were wrong, so instead they say stocks are overvalued and we're in a bubble, which makes their avoidance look prudent.

Don't mistake this for bullishness on my part. I'm less bullish now than I have been in a while, only because that's what you should do when stocks grow faster than earnings. But there's nothing inconsistent about staying invested even when you think stocks might be pricey. Trying to avoid bear markets has done far more damage to individual investors than riding them out.

"Timing the market is a fool's game," investor Nick Murray once said, "but time in the market is your greatest natural advantage." Now is not the time to do anything stupid.

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Comment by clicking here.

Morgan Housel, a columnist at The Motley Fool, is a two-time winner, Best in Business award, Society of American Business Editors and Writers and Best in Business 2012, Columbia Journalism Review.


Previously:


Sometimes, things really are different this time

The things you shouldn't pay attention to

Putting a gap between you and stupid

8 fascinating financial insights from latest Nobel Prize-winner

Investing like a psychopath

Why you're so bad with your money

8 questions you might have about the debt ceiling

An open letter to everyone under age 30

15 biases that make you do dumb things with your money

If this scares you, you shouldn't be investing

What I plan to do when the market crashes

The three most important words in investing

Monkeys and investing

Two types of risk, two types of bubbles

The secret to financial success: Use ignorance to your advantage

How to effectively fight investors' greatest enemy

Four mistakes that make everyone a bad investor

Learning from the past, and the Next Big Tren

What newspapers were saying when you should have been buying

Why you never learn from your investment mistakes

The curse of success, and why most mutual funds fail miserably

If you know only five things about investing, make it these

Why spotting bubbles is so much harder than you think

When smart investors do stupid things

The deep downside of home ownership

The biggest retirement myth ever told

He's rich, smart and old: Listen to him

Admit it: No one has any idea what's going on

Gold collapse: The start of something big?

BAD NEWS: EVERYONE IS RIGHT!

Twitter: The carnival barker of investing

Warning: Don't waste your capital being fooled by profit prophets

25 important things to remember as an investor

New paradigm for both drivers and car companies

Biases that make you a bad investor

Nine financial rules you should never forget

Gaining from financial destruction

How to read financial news

Housing: Partying like it's 1925

A rebuttal to student loan horror stories

CONGRATULATIONS: We just saved half a trillion dollars

End this crazy tax: It will boost the economy

Medicare: A dangerously good deal

Economic future looks bright

The Biggest Threat to Your Portfolio (It's Not What You Think)

Bond Market Bull Run dead at 30



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