A favorite retail investor said this morning,
"By the end of the day my Fidelity account had now officially lost all its gains of the past couple of years. My Vanguard index funds (which are held in a Vanguard account) all dropped a whopping 4% Monday. I am heavily in cash, But clearly not sufficiently. I need to raise more cash."Wow, one bad day wiped out gains for past couple years? That's really astonishing.
But is it unusual for long-only, true believer investors? Maybe not! Look at well-respected value investors Southeastern Asset Management and their Longleaf Partners Fund which has $4.8 billion. They've gotten crushed this month, down almost 14 percent. They're down 20% year to date, and the bear market is maybe two days old!
Notice that despite some "very good years" in 2009, 2010, and 2013, their most recent fund value peak (quite a while ago now) was in June 2014. They're actually close to being down over the past five years. They've never exceeded their peak more than 8 years ago in June 2007 - and they're down 35% since then, not counting whatever dividends have been paid. [It's hard to figure out exactly what the total return including dividends has been over the last, say, twenty years. It doesn't seem great.]
So is this guy shunned and reviled? No, he's a billionaire. He gets profiled in Forbes.
There's something really odd about the psychology of most investors: they don't care how much they or their managers lose in bear markets. They're interested in how much they make at the "casino" during bull markets. So, nobody ever goes to cash. Being able (and willing) to go to cash is an advantage, but only over >1 market cycles which is too long to be relevant for any investor's career. Remember career risk:
"[B]ecause asset class selection packs a more deadly punch in the career and business risk game, the great investment opportunities are much more likely to be at the asset class level than at the stock or industry level. But even if you know this, dear professional reader, you will probably not be able to do too much about it if you value your job as did the nearly 1100 analysts in my survey. Except, perhaps, with your own assets or, say, your sister’s pension assets."Career risk is what makes the mutual fund performance charts look like sine waves - no net progress - over the past 30 years.