March 17th, 2020
Yesterday was a bloodbath. My net worth dropped by nearly 9% and is down 25% from February 19th (market all time highs). It’s funny, in February I had a sense that something was awry in the markets, but couldn’t have fathomed what we’ve seen so far.
Overall, this isn’t as painful as I thought it would be; I’m actually quite numb to the whole experience. I’m quite amazed at how my risk tolerance isn’t really phased by the recent market downturns. It seems two years in the cryptocurrencty bear market have really hardened me after the drastic market losses and scams I’ve suffered.
While I’m not predicting anything, I am anticipating we’ll see further drops as quarterly earnings reports come back negative, supply chains continue to halt, Main Street is forced to close, and large portions of low income individuals lose their jobs.
In such times of uncertainty, the market will likely react emotionally; likely in a downward trajectory.
Thinking of this, I’m doing my best to mentally prepare for what that looks like. It’s not out of the realm of possibilities to see up to a 50% decline in total net worth. I’m no investing genius, so I try to look towards those who are for nuggets of wisdom.
In 2009, Munger was asked about how worried he was that stocks had fallen by 50%. He responded:
Zero. This is the third time that Warren and I have seen our holdings in Berkshire Hathaway go down, top tick to bottom tick, by 50%.
I think it’s in the nature of long term shareholding of the normal vicissitudes, in worldly outcomes, and in markets that the long-term holder has his quoted value of his stocks go down by say 50%.
In fact, you can argue that if you’re not willing to react with equanimity to a market price decline of 50% two or three times a century you’re not fit to be a common shareholder, and you deserve the mediocre result you’re going to get compared to the people who do have the temperament, who can be more philosophical about these market fluctuations
Personally, living through a such a historic moment isn’t as panic inducing at I’d thought. While it’s not overwhelming, the biggest emotion I’ve been feeling is the urge to throw all of my money into the market. I’ve thus far silenced this voice in favor of dollar-cost averaging lump sums as I get them.
I’m also not nearly savvy enough to have known to go all into cash, nor am I savvy enough to time the bottom of this historic drop (after drop, after drop). But, I’ve got some dry powder that I should just put into the market. And, in the coming months I will put it in the market, but I’m doing an experiment based off past results.
In September 2017, Equifax was hacked and its stock dropped drastically.
- September 1st, 2017: $141.59
- September 15th, 2017: $92.98
Trying to be a contrarian, I saw a good purchase opportunity, but I bought in very quickly, when the stock had dropped to ~$125. I later sold at a loss to convert to another asset.
The lesson I learned was: be patient.
Eventually, I’m going to put my dry powder to work. But for now, I’m going to breath, be patient, and follow the markets until I’m ready to make a long-term, contrarian purchase.