Negativity Sounds Sophisticated

Have you ever noticed how negativity sounds sophisticated? This is especially true when talking about investing and the financial markets. Think about it – it’s true. Many investors simply tune out the person always saying, “the market will recover” or “staying invested is the best course.” The optimist investor risks being called a Pollyanna or unsophisticated.

On the flip side, the Negative Nelly investor is taken seriously and is considered cautious and sophisticated. Just observe the financial media (which I hardly ever recommend!). For every optimist (bullish) investor they bring on for commentary, they’ll have ten Permabears (constantly negative on the markets) on. Negativity sells.

And man, do the Negative Nellies hate it when they are almost always proven wrong! You’ve never seen someone so mad that the market is doing well despite their “expert” predictions.

I think it’s part of our human psyche, but we always seem to seek out negative thoughts or commentary when it comes to the market. Funny thing is, optimism overwhelmingly wins when it comes to investing. You can’t argue with the numbers.

distribution of returns

Since 1926, stocks have had positive returns 74% of the time. I wouldn’t go to Vegas and bet against those odds.

Speaking of Vegas, I have a friend who likes to argue that investing in the stock market is tantamount to gambling. This friend also likes to gamble in Las Vegas (not that there is anything wrong with that). I say that investing in the stock market is nothing like gambling. Fundamentally, the market is structured for us to win an overwhelming majority of the time. All you have to do is participate.

Vegas is structured to ensure you DO NOT win the majority of the time. I’ll press the argument further by pointing out that the rooms, drinks, meals, etc. he’s always being “comped” is precisely because the casinos are absolutely positive they will beat you in the long-term. He isn’t being comped anything – he paid for the room, drinks, meals, etc. with his losses.

Okay, enough of the sidebar. Sure, investing isn’t always fun. And 2020 has really sucked. But the markets and history are on our side. The good times far outweigh the bad.

market ups and downs

We’re in the midst of one of the greatest market comebacks in U.S. history, and the Permabears hate it. Like it or not, optimism pays when it comes to investing.

 

Mike Minter

Mike develops investment portfolio allocations, handles trading and rebalancing, and conducts research and analysis as a Portfolio Manager and Financial Advisor for the firm. As a perpetual student of investing and the markets, Mike considers himself obsessed with the subject. Mike has earned the CERTIFIED FINANCIAL PLANNER™ (CFP®) and Certified Fund Specialist® designations. He is also an active member of the Houston chapter of the Financial Planning Association (FPA).

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