Early in my career I received a very simple, yet powerful piece of advice about the markets:
In a bull market you’re not as smart as you think you are and in a bear market you’re not as dumb as you think you are.
The problem is that fear and greed don’t always allow us to come to these conclusions in the moment — we tend to default to the opposite.
As markets continue to fall this year many investors are likely beginning to question their own intelligence just as people in 2013-14 were feeling pretty good about how brilliant they were in a rising market. Along these same lines, here’s a quick comparison of some of the different feelings and perspectives investors have depending on which kind of market we happen to be in:
Bull Markets: Fear of missing out.
Bear Markets: Fear of being in.
Bull Markets: Everything I buy is going up — I’m a genius.
Bear Markets: Everything I buy is going down — I’m an idiot.
Bull Markets: See, fundamentals always win out.
Bear Markets: See, technicals and sentiment rule the markets.
Bull Markets: I knew I should have had more of my portfolio in stocks.
Bear Markets: I knew I should have had more of my portfolio in bonds.
Bull Markets: That guy’s been calling for a crash for years — he’s an idiot.
Bear Markets: That guy just called the crash — he’s a genius.
Bull Markets: I want to be a long-term buy and hold investor.
Bear Markets: I want to be a short-term trader.
Bull Markets: I’m glad I was buying during the last market crash.
Bear Markets: Never try to catch a falling knife.
Bull Markets: I’ll sit tight when the market falls.
Bear Markets: Dear Lord, get me out of stocks NOW!
Bull Markets: Time to buy stocks?
Bear Markets: Time to sell stocks?
Bull Markets: Warren Buffett is washed up.
Bear Markets: Wait, Buffett is buying here?
Bull Markets: Buy & hold works.
Bear Markets: Buy & hold is dead.
Bull Markets: I’ll be greedy when other are fearful.
Bear Markets: I lied — I’m fearful when other are fearful.
Bull Markets: Buy the dip.
Bear Markets: Sell the rip.
Bull Markets: Why didn’t I invest earlier in my life?
Bear Markets: I’ll never invest again.
Bull Markets: Why would I want to diversify?
Bear Markets: Why was I so concentrated?
Bull Markets: I’m just waiting for a healthy correction to put more money to work.
Bear Markets: This market action is not healthy at all.
Bull Markets: Don’t worry, we’ll outperform during the next downturn.
Bear Markets: Don’t worry, we’ll outperform when the market turns around.
Bull Markets: It feels like markets will never fall again.
Bear Markets: It feels like markets will never rise again.
10 Bear Market Truths