Darn, The Market's Rising

I'm sure there are a lot of people who are excited and happy that the stock market has been doing well recently and part of me is happy too. The other part however isn't. The part of me that wants instant gratification, that wants to feel rich is happy. The part that actually wants to be rich, that wants to retire early isn't so happy. Let me explain.

I've written in the past that people often quote Warren Buffet when they want to sound like they know what they're talking about. I'd like to quote him here but hopefully it's because I do know what I'm talking about. You be the judge.

Warren Buffet, in his Owner’s Manual for Berkshire Hathaway stock writes: "Overall, Berkshire and its long-term shareholders benefit from a sinking stock market much as a regular purchaser of food benefits from declining food prices. So when the market plummets - as it will from time to time - neither panic nor mourn. It's good news for Berkshire." Applying this to the individual investor I feel the same holds true. I'd rather the market decline while I'm in my acquisition years, the years I'm working and investing, and increase in the years I'm using investments as income.

Now this doesn't mean that I don't ever want the market to increase because a stock that does nothing but go down probably, no definitely, isn't such a good investment. No, I want the market to increase but when it goes on too long as I feel it has recently, I get anxious. I'm waiting for a pull back, a correction if you will, so that I can pick up some quality investments at more reasonable prices.

This probably sounds like I'm advocating market timing but there is a difference. Two resources I found quickly with a Google search ( About.com and Wikipedia) do a good job of warning against market timing. The common theme is that market timing is akin to gambling. Investing shouldn't be gambling and so I'll invest whenever I have enough to invest. I may, as is the case now, hold onto some cash a bit longer when I feel things have gone up too much.

When Mrs. Obscure hears me talk about the down side of an improving stock market she doesn't get it. "You're mad we have more money?" she asks. No, I'm glad we have more money but I'd be just as happy if the market went down and I could improve my investment return by that much more.

As Warren Buffet says "neither panic nor mourn" when the market is down. I say neither rejoice nor be over confident when the market is up. For those who invest regularly either because you're disciplined or you want to dollar cost average, continue doing so but be ready for an opportunity presented by a drop in prices, or as Warren Buffet calls it, a sale.

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