POTUS Schmotus: Market Shrugs Off Trump Troubles As I Tuck And Roll

Premature Bail

The week of President Trump’s inauguration, I wrote this wistful post about how, when it comes to my money, it doesn’t matter who’s in the Oval Office.  I wrote it to remind myself out-loud that personal life choices affect my money more than any president could.  I wrote it to keep myself from getting skittish when Trump does Trump, the way he tends to do things:  Loudly, controversially, unpredictably… Loudly.

I wrote it to keep myself on track with my money plans through what could be a rough few months or years as Trump learns the curves of what it takes to be President of The United States of America.

I should have listened to my own advice.  Instead I flinched.  Several weeks ago, when the heat really started to turn up over alleged dealings with Russia by some people in Trump campaign, I pulled thousands of hard-working dollars out of the market.

At that time, the market was at all-time highs.  It had been riding an unprecedented winning streak, and the uncertainty swirling in Washington seemed to be the trigger that could finally bring it crashing down to correction territory of 10% or even more.  I moved a significant part of our taxable brokerage account to the sidelines to wait out the storm and try to take advantage of the aftermath…

I sold more than half of my Vanguard Total Stock Market (VTI) holdings on May 16, 2017…

The next day, this happened… Dow dives 373 points as Trump drama rattles market.

I patted myself on the back… HARD.  And I licked my chops at the thought of having so much dry powder to buy back stock at bargain basement prices.

Then, before the hand-prints on my back faded and the plaster dried on the cast over my broken arm, the market recovered… and then some.  As a matter of fact, the market is up almost 3 percent since I sold.  And I’m still sitting on the sidelines with half my cash, waiting for a chance to jump back in.

There’s a lesson here…  

This is just the latest example of why you can’t time the market.  Why you shouldn’t even try to guess which direction it will go in the short-term.

I was so sure that the stars were aligning for a dramatic drop, that I took my eyes off my long-term money goals to chase an in-the-grand-scheme-of-things insignificant short-term gain.  I ignored the advice I tried to give to myself in that Inauguration post and paid the price.

I’ve missed out on hundreds of dollars in gains so far.  I’ve missed out on some dividends.  And I created a taxable event on my capital gains when I sold.  It’s not that big of a deal.  It’s not that much money.  But it’s still a self-inflicted fail, brought to me by the voices in my head.

Fortunately, I didn’t sell everything and I left our 401k money (by far the largest part of our portfolio) in the market to chug along through the ups and downs.  But I still lost good money from trying to time the market.

I definitely don’t know where the market goes from here in the short-term.  If the uncertainty created by a special counsel investigation into matters that may involve the President of the United States doesn’t shock a seemingly overheated market, I really don’t know what will.  It’s hard to even compare this to similar times in history to get a gauge.

It’s just best not to try.  Investing, for almost everybody, is best left on auto-pilot with a long-term horizon.  Short-term trading should be left to the algorithms on the high-speed computers snuggled right up next to the servers of the stock exchange.

The market can’t be timed by us mere mortals.  This is just more proof why.

I’d love to hear your comments.  Have you been trying to time the market?  Have you gotten skittish at all lately?  

Oh, by the way, I am not an investment advisor.  These are my opinions.  Do your own research before investing.  Thanks for reading! 

 

 

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9 comments

  1. CC,
    I made the same mistake several years ago and now my mantra is “time in the market”. Stay in, ride the ups, downs, collect the divvies and you will almost always be better off. Any time you learn a lesson , it is not a wasted effort. This is how we get better at what we do. Good post, thanks for sharing.

    -Brian

    Liked by 1 person

    • That’s a good mantra, Brian. It’s human nature to think you can outsmart or get ahead of the market based on one factor or another. It’s easy to forget that there are countless other unseen factors that play into whether the market goes up or down day-to-day. Thanks for reading, as always!

      Like

  2. This is a dilemma for a lot of people and I have struggled with what to do as well. Because our FIRE date is in 9 months, we did reallocate to a 50/50 portfolio recently and are trying not to look back. We will probably move back towards equities like Kitceals recommends after we retire.
    Great post.

    Liked by 1 person

    • Congratulations on being so close to FIRE, Ron! Excellent point. If I were as close to FI as you, I might do the exact same thing and pull back on stocks automatically. The swirling uncertainty in Washington would’ve made the decision just that much easier to make.

      I, on the other hand, was just trying to outsmart and pick up a couple hundred, maybe a thousand extra bucks on a relatively short term trade. I’ve got a much longer time horizon. Not a smart move on my part.

      Like

  3. Great post, I know that feeling. Luckily I’ve only mostly experienced that with “play money” on some brokers. Maybe it’s a good idea to put up some “lessons learned” in writing (not digital!) and stick it up to the wall next to your monitor. Do this to keep you motivated (write a blog post every x days), and stick to your plan (do not act on short-term market actions!). Keep on sharing your stories with us, though, I as I believe we can all learn from them.

    Also, do you participate in crowd lending or peer to peer lending? I’ve recently written a blog post about that since it’s the only thing (in the category; “let your money work for you”) that I’ve had experience in so far. Really looking for opinions from others on that subject.

    Liked by 1 person

  4. Hey man, I’ve been there, done that. Individual stocks were my nemesis. I agree with you – timing the market is just a no win proposition. I might go in heavier when the market takes a big dip.
    As for our f’ed up president and that whole situation, hold onto your hat and hedge all your bets.

    Liked by 1 person

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