Carnage the magnificent
Back in the fall, when the stock market was in free fall, I endorsed what I called the Ostrich Theory of Investing, derived from this notion by Megan McArdle:
I have no idea what’s going on with any of my equity investments, because that is not short term money that I need to keep my eye on.
If you look you will get upset, and you will be tempted to do something stupid. I can’t guarantee that the market won’t drop further and you won’t regret having held on. But as a general rule, selling into a massive liquidity crisis is a pretty bad idea. Selling in a panic because your assets just dropped 30% is almost certainly a bad idea.
The Dow Jones Industrial Average, that very day, dropped 504 points to 9447. (Closing today was 8228, so things have not done so well in the interim.) At that time, I vowed not to look at my 401(k):
I am fairly decently hedged; I doubt I’ve lost that much. (At the end of the year they will send me a statement and I will know for sure, but I’m not going to spend my odd hours on their Web site getting up-to-the-minute bad news.)
The statement has now been received and opened. And no, I didn’t lose 30 percent. In fact, I didn’t lose 20 percent. (It was a hair under 19 percent.) Not inspiring, but not as horrible as I might have feared, and not enough to make me want to shoot myself for such godawful investment choices; in fact, of the six current accounts, two actually made money, though obviously not enough to offset the losses in the other four. And I take a certain grim satisfaction in this: one particular account to which I am no longer making active contributions, but which still contained a small balance (about $2,000), was devoted to shares in the investment-management firm itself, and it fell by 65 percent. Shows you how much they know, right?
fillyjonk »
21 January 2009 · 9:18 pm
I’m contemplating keeping my money in a hermetically sealed mayonnaise jar from now on, instead.
McGehee »
21 January 2009 · 10:26 pm
You won’t need to worry about me stealing it, FJ.
Jeff Shaw »
22 January 2009 · 8:37 am
All things considered, -19% is really good, last year. Congrats.