When I was growing up, I used to fantasize about being tall enough to meet the height requirements for the scariest looking rides at the theme park. And as soon as my growth spurt finally kicked in, I got on the line for Goliath. Actually, I think my growth spurt occurred in the three and a half hour line for that ride. After getting strapped in, my excitement started to feel like nervousness. When the train started climbing the incline, nervousness turned into big time hesitation. And when, after the looooong climb, the peak came into sight, hesitation became plain, old fear.
Then I fell.
Everyone around me fell.
Grown ups feel it too
Last year, around October and November, the S&P took a dive that eerily resembles the drop on Goliath. It was a steep climb by the market over many years but man, that drop was scary. So scary in fact that by March of this year, many grown ups were vowing never to ride again. All the investors fell and they were wondering just what had happened.
Many decided that they were just going to play it safe and go on a carousel of some sort or just keep their money at home. They did not want to have to endure a drop like that again. “Never again” they all said.
Wise men keep riding
But seasoned investors knew that the drops were part of the ride and that the low points were actually the best time to get on the ride. Investors like Warren Buffet decided that since everything had fallen so far down that it was a good time to start buying stocks. This guy lost so much money when the ride plunged yet he decided that it was good time to get even more strapped in by buying lots and lots of GS. On that one move alone, he stands to make at least 3.1 billion dollars.
Can you stomach it?
Many experts will tell you that the best time to invest is when the market is down but what they neglect to mention is how emotionally hard it is to get on the ride when you know that drops will occur in the future. It basically comes down to having the guts to believe that roller coasters will also sometimes go up.
This is what the S&P has done since the drop:
It looks like it might be close to another peak so I got out of the ride already but when it comes back down, I think I am going to join the wise men when they get on board again.
How close are we to the peak? Will the drop be as bad as last year? Share your roller coaster stories.
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[...] few weeks ago we talked about timing our moves into the market to coincide with the moves of wise men. And so we said that we will try to not buy [...]