“What kind of a wish is this?” you might wonder. “As an investor, why doesn’t he want a bull market, and that too for the next 10 years? Has he lost his senses?”
Well, before you exercise your brain more and think that I am out of my mind, let me make one thing clear.
I, like you, love seeing stock prices rise.
I love it everytime a stock I own surges, and makes me richer on paper.
But even then, I hate the sight of a bull market – when stocks rise 30-40% on an average annually – and don’t want to see one for the next 10 years!
10 reasons I hate a bull market
- I hate the ugly emotions – like greed and arrogance – that evidence themselves in a bull market.
- I hate that a bull market makes stock investing a gamble.
- I hate it when small investors are fooled by a bull market into buying junk stocks that they wouldn’t have touched, in normal times, with a 10-foot pole.
- I hate it when people – especially stock market experts – say foolish things during a bull market.
- I hate that a bull market reveals the dark, small, foolish side of human nature. I think we are smarter than what we appear to be during a bull market.
- I hate to see financial advisors compromise their integrity during a bull market.
- I hate to see retirees gambling in a bull market and then losing their lives’ savings.
- I hate to see young investors unfairly penalized by a bull market (most investors under the age of 30 who start investing in a bull market, don’t get the chance to build a portfolio of solid companies at cheap prices).
- I hate the emotional exhaustion that a bull market brings along.
- I hate it when a bull market ends badly (and it always does!) and leads investors to swear off of stocks forever.
Why I don’t want a bull market for next 10 years
Here is what Warren Buffett had to ask investors in his 1997 letter to shareholders…
If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices?
These questions, of course, answer themselves.
But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?
Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall.
In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying! This reaction makes no sense.
Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.
Now at 33, I expect to be a net buyer of stocks over the next 10 years. And this is the reason I would be happier seeing sinking (or just moderately rising) stock prices…not a bull market that takes stock prices beyond my comfort levels.
What about you? Do you expect to be a net buyer or net seller of stocks over the next 10 years? Let me know in the Comments section below.
———Safal Niveshak’s Art of Investing Workshop in Bangalore————
Just 2 seats remain for the Art of Investing Workshop in Bangalore on Saturday, 14th April 2012.
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I can rate this article as one the best out of many u have written.
Me too at 35(is my biological age, if i go by my school certificate i am 33..ha ha)would love if market crashes and gives me a chance to buy my favourite stocks at mouth watering prices.
At 45 i would be sitting on rock solid portfolio of stocks.
But Vishal please after that i would love to see non stop bull market for next 20 years, so, that at the age of 65 i can retire rich with billions in my kitty…aamen.
Thanks for your feedback, RichFellow! I second your view 🙂
Ha ha, it would be kinda selfish of us to think that we are all at 30-ish and wants the market to keep crashing, there might be a lot of people at their retirement now or in the near future hoping for a bull run to move their money to fixed instruments.
My wish would be to see the market perform purely based on how businesses are operating, be it up or down. That would give us a clear picture of where we are now and where we are heading. Instead of some stupid FII inflow creating a bull and they book the profit leaving small investors like me in losses. SEBI/Regulators, listen up.
But we could only wish Vishal, the crazy Mr.Market will do what it will do, that’s one wrong place to keep a wishlist. Although one thing is certain, history repeats. So everybody will get an opportunity, the question is are we prepared?
Well Mansoor, for stock market investors, history not only repeats, it rhymes. So yes, preparation is the best possible way an investor can expect to be on the sane side when things are running wild, or turning upside down.
ha ha Richfellow, somehow if I can buy low and then rejoice for life is not so simple. It is definitely far more complicated. What may be awesome to own today becomes a pariah tomorrow and for most stocks these cycles are getting shorter.
I met someone the other day who had an Android phone and he mentioned of an app which can help generate certain frequncies which keep mosquitoes away ! till then I thought cellphones had killed digital cameras only !!
As one of the articles mentioned what are your objectives/ expectations needs to be clear. If you are a hunter for the double in 2 year type stocks be ready to loose multiple times as well.
I think a decent FD + risk rate is a decent return if you can manage. I personally would be happy generating a 15% to 18% post tax CAGR. BTW Sensex, CAGR, since it started (100 in 1970) is around 13% as of now (17,500 level).
Indeed, Sudhir! In fact, earning an annual average return of 15% (it may be 20% in one year, 5% in the next, and -10% in the third) for 20 years is a great enough return. One does not need manic bull markets for that.
Wowz !!!! what a article…..Vishal, I love your ability to convince people by giving logical examples…..I DO NOT WANT BULL MARKET FOR NEXT 15 -20 YEARS and than a BULL MARKET(GOD are u listening)……
Ha Ha Ha!
Vishal ,
your wish has been granted “retrospectively” since 2007.
Yes Kshitij 🙂
Dear Vishal,
Whether I need a bull market now or 10years down the line, depends on your age, your requirements and the amount you have already invested in the market.
If I have invested 5 years (2007) back towards a 2017 goal, I certainly need a bull market before 10years. But if I am looking for my retirement 20years down the line, then I don’t want it now. The more its sinks its better and that may hurt someone else.
Regards
Indeed Ajay, and that’s why I said why “I” (at 33) don’t want a bull market for the next 10 years 🙂
Dear Vishal,
It will be great, if person like you can migrate from “I” to “We” in the larger interest of the investing community.