Lately, some moves in the stock market have stumped even the most seasoned of investors. In the last month, we’ve seen more dips and rallies than we can count, and the S&P 500 is headed for its worst month since March 2020, when we saw that sudden COVID-induced dip — and the Nasdaq is on pace for its worst month since October 2008. Experts who have been looking to historical data to explain some of these movements are, frankly, stumped. There is a lot going on right now. We have higher interest rates, inflation that’s only supposed to get worse throughout the year, supply chain issues, and the Omicron variant, just to name a few.
If you’re worried, let us just say: what you’re feeling is totally normal. When we wake up and take a look at our portfolio and see that we’re losing our precious hard-earned money, we want to put a stop to it. We want to take action. But taking action during times like these is rarely, if ever, a smart move. Statistically, we know that investors who stay the course do better over time than those who try to time the markets — those who sell when things get rocky, and try to buy in again when things are looking up. You can’t time the markets.
Sometimes, when we feel that urge to take action, it’s actually inaction that’s our best friend. And that’s perhaps more true about the stock market than anything else. We have to stay disciplined during periods of vulnerability. Perhaps no one knows that better than Jinny Uppal, author of “IN/ACTION: Rethinking the Path to Results.” In her book, she says that far too many of us listen to the voice in our head that tempts us to a default action path — not just with investments, but with everything. Our brains are wired for action. But sometimes, what we need most is reflection and “strategic inaction,” a more efficient way of achieving more by doing less.
Jinny lets us in on how she arrived at the hypothesis that inaction was so effective, a d how most of us have an “action bias.” She says: “We tend to correlate action with outcomes, and I’m going to posit that we actually control outcomes in most cases, in business, in stock market investments, far less than we realize. We like to believe we do. And the belief that ‘I am the one who can control the outcome with my action,’ makes us take more action than is necessary.”
Jinny says: “The more ambitious and goal-oriented we are, the more we chase action to achieve desired outcomes, leading to fatigue, burnout, and mistakes.” She explains, exactly, how our drive to action may be burning us out. She and Jean also dive into an interesting story about a CEO of a major global medical imaging firm, who, when informed of the death of a child on a machine made by the company, went for a two-hour walk instead of immediately calling an emergency staff meeting and lawyering up. Jinny explains.
We look at all of this in the context of how we know that it often takes action to drive results. For example, we have to ask for the raise we want. We have to take steps to open a brokerage account, or to save more — we have to be our own advocates. With that in mind, Jinny articulates the difference between doing nothing and “strategic inaction,” and how inactivity can play an important role in driving creative thinking. (HINT: a little mind-wandering never hurt anyone 🙂
In Mailbag, we advise a divorced listener on setting up a trust for her son. And in Thrive, how to host a Galentine’s Day party on a budget.
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