Contrarian Thinking: The 10 Best Days
Many mutual fund companies and financial advisors often preach the virtues of long-term investing by citing the “10 best days” scenario. They will show you that if you attempt to time the market, you may potentially miss out on the 10 best days of the stock market and affect your returns. But what are the 10 best days? Does it depend on your perspective?
Perhaps the financial companies have it all backwards. They always show the 10 highest gaining days as the 10 “best” days. I understand why their marketing department spin using positive returns; as most investors rather think in terms of pluses instead of minuses. However, if you are preaching to an audience interested in long-term investing — young investors. Shouldn’t the 10 best days be the days with the highest losses?
The Recent Market Losses
We’ve all seen and experience first-hand the big market dip/correction consistently in the last few weeks. Rather than lamenting about how the market took a shalacking, a contrarian thinking would be that these days are the best days to hunt for a bargain! Contrarians are busy evaluating the buying criterias for the stocks on their watch list.
During this time period, they can buy more shares for the long-term with the same amount of investment capital. Every $1 you are investing during this time is buying you more shares than when the stock market is skyrocketing. If you are a young long-term investor, you should be loving the fact that your money can work much better for you during these 10 highest losses days rather than the 10 highest gain days (in the long run).
“Be fearful when others are greedy and greedy only when others are fearful.”
We all know how to spot sales and bargains in our everyday life/shopping, except for when it comes to the stock market. Investing is not just about knowing how to analyze stocks and companies, it might just boil down to whether you have common sense, discipline and emotional control. [Editor: or whether your fund manager or financial advisor has these qualities!]
You don’t have to have a high IQ or be very smart in investing to take advantage of the occasional great opportunities that the market presents to you. But you do have to have the courage of your convictions and the willingness to act when everyone else is TERRIFIED and PARALYZED. The lesson is to strive to follow LOGIC rather than EMOTION. Some people can do this and others can’t. When the opportunities do arise, you have to make sure that you can play out your hand under all conceivable circumstances, if you can and you have the right facts and you let the market serve you (not instruct you), you probably can’t miss.
[Editor's Note After reading that last paragraph, anybody feel like we're playing poker against Mr. Market?]
