Recent volatility in the stock market has kept my phone ringing off the hook. Many people are unnerved when they see lower balances in their monthly statements. News coverage has raised anxiety levels even further. Too much advice, much of it contradictory, leaves investors scratching their heads and wondering what to do next. Should they stay in the stock market or cut their losses and get out of “the game” right now? Or, depending on whom you listen to, perhaps they should even jump in while the markets are low?
The only way to answer these questions is to differentiate between the two different “games” going on in the stock market. There’s the long game, which involves investing in a highly diversified portfolio of stocks and then holding them for a very long time (as much as several decades). Then there’s the short-term game, which is, for the most part, a pastime for suckers. In effect, the latter is a contest between highly resourced insiders and amateurs.
Warren Buffett is fond of saying, “If you’ve been playing poker for half an hour and you still don’t know who the patsy is, you’re the patsy.” So, who’s the patsy in the short-term game?