I had two sharply contrasting conversations on the floor of the New York Stock Exchange late last week, but they both underscored the same point: good things often come to those who wait.
The first discussion was with one of the more thoughtful TV business news anchors who asked me how investors concerned about recent market turmoil should preserve or rebuild their nest eggs. The second, which occurred between TV segments, was with a floor trader who uses complex algorithms to direct high speed, computer-driven trading programs. He said that even though his profession involves the ultra-fast trading we’ve all heard about, his favorite personal trades were a handful of industry-diversified stocks he’d bought at the beginning of the First Gulf War in 1991 and held on to ever since.
The point I tried to make on TV was consistent with the trader’s personal actions: sometimes we’re better off doing nothing than reacting to the demand to do something and do it now. Of course, we need to realign our investment portfolios as conditions change, companies and economies evolve, and our own goals shift with time. However, we don’t always have to take action and usually shouldn’t when we’re reacting to our own emotions or to market swings that we can’t fully understand.
The same logic, by the way, applies to government policymakers. European governments dealing with the debt crisis, or our own budget busters, have moves they need to make, but often might see better results by exhibiting a bit of patience. (That was the point of last week’s blog on the Fed’s Operation Twist. Remember benign neglect?)
As my colleagues and I continue to try to make the economy and markets more understandable, listen with a selective filter to what we talk about on business television. Those discussions are material for thought and planning and not a prompt to gyrate with the market. I’m pretty sure none of us can beat my new friend, the floor trader, at the high speed game, but we may be able to best him with thoughtful allocations over the next 20 years.