Why do folk complain so much when the Stock Market goes down a "Little"?

[ShokWaveRider]

If it went down say 25%, 30% or even 50%, people who were in it, would still be 50% better off than they were in 2009/10. It has had a good run, lots of folk have made money. One cannot win all of the time, even though one would like to. The media reacts to a 500 point loss as if it was the end of the world. It is only 2%. That is a drop in the proverbial bucket. Even with this volatility the traders are still making money intra day.

Just trying to understand and am not sure what all the fuss is about.

 

[cooch96]

Just irrational human nature, I reckon.

This line of thinking probably made sense to our caveman ancestors and was a crucial survival instinct: we caught 3 fewer gophers than last week. Doom! We must move camp to a new valley immediately!

 

[NYEXPAT]

Once you get down 40%-50% people are tired of hearing about it and want to hear about "little green shoots"!

 

[jollystomper]

It is human irrationality that is fed on, in my view, as to how the market drops are reported. I find there is an element of MARKET DROPPED 2% OMG ARMAGEDDON IS UPON US emotion in the way it is reported. The stories on the drops all mention how the markets are down this year, for the first time in several years - but never point out that they are still up from 2008-2009, or even from 2015.

While personally my first reaction is not being happy at being down from this years peak, My logical sense reminds me that I do not need the money tomorrow, or next year, or even 10 years... and even if I never get back to that level, the "loss" spread out over a (hopefully) 20-30 year retirement really is not anything to worry about.


Edited to add: In sum, bad news sells. Good news does not, so folks tend to look for any bad within the good. Human nature.

 

[Aerides]

It's the same with weather (re the media).

The financial media reacts to every blip just like the weather media does every storm: Because they know that's fodder for their audience, ie ratings ie money.

 

[Which Roger]

Market news is reported just like any other news. Rational reporting doesn't sell.

 

[Rianne]

DOW hit its lowest point in March 2009. Took approx. 5 yrs. to recover to previous high in June 2007. We're staying put but rethinking bond funds to CD's.

 

[Dtail]

DOW hit its lowest point in March 2009. Took approx. 5 yrs. to recover to previous high in June 2007. We're staying put but rethinking bond funds to CD's.

Already moved from bond funds to CD's much earlier this year, but wondering on your thoughts in a not definite rising interest environment.

 

[footenote]

"Humans may be hardwired to be loss averse due to asymmetric evolutionary pressure on losses and gains: for an organism operating close to the edge of survival, the loss of a day's food could cause death, whereas the gain of an extra day's food would not cause an extra day of life (unless the food could be easily and effectively stored)."

https://en.wikipedia.org/wiki/Loss_aversion

 

[ShokWaveRider]

My point is folk who are in the market for the most part have been in it for a long time, and know that the ups and downs are inevitable. Regardless of news, it still seems like a main point of anxiety when it goes south... even just a little south, thus generating a lot of what appears on the surface to be concerned venting. While we do understand this reaction, it is still a well known fact that it WILL happen.

It is all well and good for me to talk, we have been getting on average ~4% return for the last 12 years on a variety of long term CDs, and have not been in the stock market at all. NOW, I am in somewhat of a quandary about where to reinvest 75-85% of our net worth, as it is all maturing between the end of December and the end of February. No more 5% opportunities anymore. Parking the cash in a MM Paying currently 2.38% or so, seems to be the prudent choice while waiting for some specials.

 

[Rianne]

All we're thinking about is preservation. Something positive. Putting stock funds in a box and shutting the door.

 

[mamadogmamacat]

people just like to talk, and not only for venting purposes, about things "bigger" than them ,be it the markets with all their moving parts and influencers which make them quite complex, or the weather (witness how popular that "this weather is awful" thread was)

it helps to confirm that others are feeling that they have made for the most part, the right decisions and have the plans right for them.

here I am proving the point and no offense but there you are too talking about your plans

its just human nature

grateful we have such a well managed relatively pleasant for the most part forum to do just that

 

[Rianne]

My point is folk who are in the market for the most part have been in it for a long time, and know that the ups and downs are inevitable. Regardless of news, it still seems like a main point of anxiety when it goes south... even just a little south, thus generating a lot of what appears on the surface to be concerned venting. While we do understand this reaction, it is still a well known fact that it WILL happen.

It is all well and good for me to talk, we have been getting on average ~4% return for the last 12 years on a variety of long term CDs, and have not been in the stock market at all. NOW, I am in somewhat of a quandary about where to reinvest 75-85% of our net worth, as it is all maturing between the end of December and the end of February. No more 5% opportunities anymore. Parking the cash in a MM Paying currently 2.38% or so, seems to be the prudent choice while waiting for some specials.

The issue is when will it come back. I keep entering lower and lower "portfolio start amount" in firecalc.

This reminds me of going shopping and a great 30% off sale. I walk out feeling good, until I go back a week later and the same clothes are now 50% off.

 

[Spock]

It's similar to the "advisors" Megacorp gave us access to via Ameriprise. In chatting with him I found out he had been in the "business" for 4 years. Googling him found his resume still listed his being on his college sports team as one of his major accomplishments.

Anybody with less than 10 YEARS investing experience has never experienced a crash, a boom/bust cycle, a market with the fed wasn't buying and backstopping assets, or until very recently a rising interest rate environment. This is all new to them, as well as new to a lot of computer algorithms that the market mistakenly assumes provide liquidity to their group-think ETF and index funds.

 

[OldShooter]

Just irrational human nature, I reckon. This line of thinking probably made sense to our caveman ancestors ...

Yes. Spot on, actually. The behavioral economists (particularly Richard Thaler) have studied this and shown that human behavior in the face of risk is not symmetric. We are more unhappy with a loss of a certain size than we are happy with a gain of a similar size. That is why, as the OP observes, unhappiness with the downturn exceeds happiness with the market's gains over recent years. Another of Thaler's observation is "recency bias," which causes us to overweight the most recent events when analyzing a situation or making a decision.

Thaler's "Misbehaving" is a worthwhile read if only to help us understand our own behavior in making decisions, especially investment decisions.

 

[Which Roger]

All of this discussion highlights the importance of these two factors in investing:
1. Know your risk tolerance, and set your asset allocation accordingly
2. Put your portfolio on autopilot to take the emotion out of investment decisions

 

[Cassius King]

Doesn't it also depend on where one is at in their investing life? A market drop to myself is welcomed. I can buy cheaper.
Where as a newly retired person could get a little bothered by a market decline. Maybe they need to adjust their withdrawal rate to feel comfortable. But unless they are living off interest/dividends alone, I can understand a quip about a market downturn.

 

[mountainsoft]

This reminds me of going shopping and a great 30% off sale. I walk out feeling good, until I go back a week later and the same clothes are now 50% off.

Since I am still in the accumulation phase, I like to think of market drops as a "sale". I'm getting the same stocks at a lower price, or more stocks for the same amount of money, depending on how you look at it.

I'm sure I'll feel differently when we stop contributing and start withdrawing.

Last night I told my wife the stock market dropped another 500 points. Her comment - "I don't want to know". I guess she doesn't enjoy watching the market rise and fall like I do.

 

[kgtest]

What moves the market?
1. People buy more shares then others sell (GAIN)

2. People sell more shares than others buying (LOSS)


Now, what causes investors to sell (stocks). Uncertainty, looking for a better bargain, re-adjusting asset allocation to heavier liquidity, taking RMDs and SWR and spending instead of reinvesting presumably to cover expenses(inflation) (*housing/healthcare etc), high unemployment, FEAR.



What causes people to buy (stocks). Wage growth, stable economy, low expenses (inflation), high employment. HOPE.


All technicals asiide, it's a scary time as an investor, but with volatility can come some reward to those willing to risk it. I heard a stat somewhere that only 13% of americans are taking advantage of there employer's 401k match. That made me gasp.

 

[Moemg]

All we're thinking about is preservation. Something positive. Putting stock funds in a box and shutting the door.

I know quite a few people who got out of the market or went to all safe investments in 2009 . They missed out on a great run up . I retired Jan. 2008 and almost immediately lost over 30% of my portfolio . After being talked down from the ledge I stayed the course and got all my money back and a lot more .

 

[Dtail]

I know quite a few people who got out of the market or went to all safe investments in 2009 . They missed out on a great run up . I retired Jan. 2008 and almost immediately lost over 30% of my portfolio . After being talked down from the ledge I stayed the course and got all my money back and a lot more .

Always good to hear these references. Retired Aug 2017 and portfolio after withdrawals is down almost 5%. Not much, but many retirees here have seen nice increases if retiring after 2009.

 

[marko]

I know quite a few people who got out of the market or went to all safe investments in 2009 . They missed out on a great run up .

+1 I've often mentioned my smarter-than-you neighbor who proudly announced that she 'sold every single thing' in the market on the last Friday of February 2009.

At the time, DW said something like "Well whatever helps you sleep at night" to which she replied, "Oh, I'm going to sleep just fine!"

AFAIK, she never went back in.

 

[youbet]

If it went down say 25%, 30% or even 50%, people who were in it, would still be 50% better off than they were in 2009/10. It has had a good run, lots of folk have made money. One cannot win all of the time, even though one would like to. The media reacts to a 500 point loss as if it was the end of the world. It is only 2%. That is a drop in the proverbial bucket. Even with this volatility the traders are still making money intra day.

Just trying to understand and am not sure what all the fuss is about.

It's the way people are. Hey, it even happens here on our forum. For example, there's a concurrent thread where some folks are actually whining over the fact that someone else chooses to leave a gratuity for a server in a restaurant. Can you believe that? They aren't compelled to do anything, but they still like to hear themselves bitch. I guess it works like that for investment performance too........

 

[youbet]

Always good to hear these references. Retired Aug 2017 and portfolio after withdrawals is down almost 5%. Not much, but many retirees here have seen nice increases if retiring after 2009.

I retired before 2009 and have seen nice increases. A nice increase in the S and P 500 between June, 2006 and now during a period of relatively low inflation. What's not to like?

 

[OldShooter]

What moves the market?
1. People buy more shares then others sell (GAIN)

2. People sell more shares than others buying (LOSS) ...

Nope. The number of shares sold is always exactly equal to the number of shares bought.