Of all the reasons to delight in Spring, watching my son’s baseball games is at the top of my list. The Shelburne Wildcats have now won five straight games (knock on wood) and the outlook for a playoff berth is good. However, the Wildcats season opener loss to Camels Hump Middle School is still fresh on my mind. It’s not that they didn’t win, it’s how it happened. The squads had been locked in a tight, low scoring battle for five full innings when Shelburne’s bats finally came alive. With bases loaded and two outs, the excitement among the parent-fan contingent was palpable. Player #14 then connected for a solid hit, the 2nd base runner sprinted to 3rd and — what? — he’s out??? The controversial call stopped the Wildcats’ momentum dead in its tracks and the team ended up losing. From my viewpoint nearby in the stands, it was clear the runner was safe, yet the home plate umpire came to the opposite conclusion. How can two people observe the same situation and have completely different opinions? It boils down to perspective.
It’s also a particular point of view on stock markets which tends to dictate whether someone is a passive investor or an active investor. Passive investors typically adopt what I like to call a set-it-and-forget-it approach: it’s time in the market, not timing the market, they’ll tell you. Diversify and stay the course, they’ll say. The underlying premise is that the market “always bounces back.” Each year my husband’s employer brings in a John Hancock representative to speak to the group for a 401(k) presentation about long-term investing. In a perfunctory effort to encourage JH’s 401(k) participants to buy-and-hold, the rep displays a PowerPoint slide and says, “Here’s what your return will be if you missed the 10 best months.” I’d love to ask the JH rep what would happen to performance if an investor sidestepped the 10 worst months?
We all view life through a different lens. You and I can watch the same baseball play unfold and, if for you it’s an out and for me the player was safe, it’s not a life-changing event. But what if the market experiences an unusual circumstance, a statistical anomaly, or a decline of generational proportions at the very time you’re counting on having these important funds intact, then what?