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Investor Fatigue

I was having a drink with a friend the other night when he announced that he was pulling a significant amount of his money out of the stock market. “I just can’t take it anymore. Up and down, up and down. It’s just not worth it. I am willing to sacrifice return for peace of mind”.  His money is going back to the tiny returns and safe haven of bonds and CDs

Like many of us he is suffering investor fatigue.  When 100 to 300 plus point swings on the Dow become the norm instead of the exception, it’s no wonder that many investors are getting tired and just giving up.

Unfortunately investing in the stock market isn’t rational.  There is no reason that so many great companies are trading so far below their value, and the rational side of me wants to be a buyer.  I suspect that if I relax and take the long perspective I would buy great companies at very attractive valuations and not worry about it.  But in the short term I worry about investor fatigue; that my 50 year old and older friends will say “enough is enough” and continue to pull out their money on the upside bumps, which could mean a very long recovery, and really long periods of bumpiness, with more people giving up and dropping out. 

Our major corporations are flush with cash.  There are a multitude of problems to be solved that could be big business for smart companies.  While we are a long way from economic health, things are improving.  But all that is naught for the market if we’re too tired to invest.

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