Meaningful Returns

Boredom is complicated. On the one hand, boredom can be used to fuel creativity. On the other, it’s a black hole.

But when the markets are boring for a long period of time, as they have been recently, many people who are invested in those markets don’t get bored. In fact, their emotions tend more toward apocalypse and doom and gloom. This is at the same time both reasonable and unreasonable.

It’s reasonable because historically, bored markets have often preceded corrections where stock prices decrease fairly dramatically. And so, the thinking goes, since this has been an unprecedented period of boredom, does that mean we are headed for an unprecedented period of correction? And of course, since we are dealing with an infinitely complex future which is entirely unknowable, there are people on both sides with evidence to support their claims.

And that is why this worry is also unreasonable, to a point. Unreasonable because we will never know with any degree of certainty when a correction will occur or to what extent, just that it definitely will occur. This is the price of admission for the investment return you expect from the stock market. But it’s unreasonable to a point, where if you don’t have an investment process in place based on your personality and what you are working toward financially, then any looming correction should probably scare you a little bit, because who knows whether the risk you’re taking is appropriate, or if you can stomach it?

Investing works best when it is defined as a process that has been created especially for you, and the reason this is so is that a defined process doesn’t make emotional decisions in the face of adversity. And it’s the emotional decisions in the face of adversity that can very quickly destroy the wealth you’re seeking to create and use.