Long Term Investors and Darts

Cite this Article
Elizabeth Nowicki, Long Term Investors and Darts, Truth on the Market (November 09, 2006), https://truthonthemarket.com/2006/11/09/long-term-investors-and-darts/

I read with interest an article on cnn.com indicating that we have been on the “longest down streak since June 2005.â€

I have two comments:

1.  “The longest down streak since June 2005†is hardly anything to write home about.  We are talking about the longest down streak in the past 16 months, not . . . since Black Monday.  Yet, at first blush, a sentence including the phrase “the longest down streak since. . .†is unnerving.  Unnecessarily so, in my view.  And if it is unnerving to me, I have to believe it is unnerving to folks who know less about the markets than I do.

2.  Now is a good time to talk about darts.

When I saw the cnn.com notation about the “longest down streak since June 2005,†my immediate thought was “so what.â€Â  If we all agree that investors are supposed to either be in the market for the long term or keeping their cash under the mattress (or in gov’t bonds), why should the typical investor care that we are having the longest down streak of the past 16 months?  I must admit, however, that my “so what” comment in response to the down streak observation was colored with a bit of annoyance with the media sources.  Does the media really need to throw out random market information that is best considered with more context than is provided in the article?  (Note to self:  is it “does the media” or “do the media”)

 My annoyed response to the cnn.com language about the “longest down streak†compelled me to go find a reference to the studies that showed that selecting stocks by way of randomly throwing darts was close to as profitable as having professionals pick stocks.  My point?  For a long-term investor, things generally appear to work out if the investor is diversified or has a dart board.  So the news about what the market is doing today or has done over the past . . . 16 months is not particularly relevant.  The “down streak†language and/or the fear of another bubble (or burst) are nothing new.  But the long-term investor who has carefully selected his portfolio using the dart method really should tune out the noise about short-term changes in the stock market.  I think it is time to re-remind Jane Q. Investor that she should be diversified, and balancing the window of her investments against the window within which she needs the money.  Taking a short-term view of what the market is doing right now is like planning your entire future career based only on the job listings that are today available in the newspaper classified section.  The media appears to actually encourage this short-term focus for “we, Jane Q. Public,†and I cannot say that I much appreciate that hype.
So CNN.com’s comment that we were experiencing the “longest down streak since June 2005†did not scare me into selling at a loss or some such.  Rather, the comment made me want to go back to the SEC, so that I could work with the SEC’s Office of Investor Education on a media blitz designed to remind investors how they might just want to consider throwing darts and then sitting tight for the long haul as opposed to responding to media noise or tracking the market by way of media commentary.  (In defense of the SEC OIE, which is a great great office by the way, many people do not even think to look on the SEC website for useful information.  Many folks do not know the SEC exists.  Regrettable, that.)