Watching a Car Crash

Here’s the TSX index for the last month.

It’s almost 11% off it’s peak value and people think index investing is boring.  Shame on them.   It’s sort of like watching a car crash in progress (I suppose I could make a joke about GM).  I know I shouldn’t be looking but it is so interesting to watch and I’m curious where the bottom is this time.

I also know timing the market is hard as hell, but when this is like the third major shift down in a year you start to wonder if you could just hit one of them sort of right you could make like 10% in a otherwise difficult year.  But that’s just speculation talk and I’m not that brave or stupid (take your pick).

But with all the bad news out there lately I’m tempted to just shut off the TV delete a few bookmarks from my computer and ignore it all for a month.  Has anyone else done this?  I know I’ve had periods where I ignore things by just being busy.  It sort of prevents you from getting overly emotionally involved.

6 thoughts on “Watching a Car Crash”

  1. Market crash is one reason why index investing doesn’t always work. On the upside, the index investments probably outperform 80% of active manager. On a down market the managers will outperform the index (unless that manager is hapless – then your SOL).

    As for market watching. Yeah, pain all over. my gut wrenches.

  2. Pragmatic
    Then there must be alot of hapless managers, of 1368 Canadian mutual funds only 66 are managing to beat the ishares 60 index Etf.

  3. I think index investing is only supposed to work if you invest the same amount regularly each month. That prevents your cost basis from getting too high because you buy more when the market is low and less when the market is high.

    If you invest irregularly in index funds, then it becomes just like any other stock. You have a better chance of getting burned if you don’t buy at the right time.

  4. I look at these tumbles as buying oppotunities. I also have to take a break from watching the news from time to time, but since I have structured my portfolio to concentrate more on the dividend income than the growth in capital, these are good buying times.

    I worry about those who have to liquidate part of their capital to make ends meet. That is the problem.

    Q

  5. Pragmatic,

    Actually Old Dude has a point. The fees you pay on active funds act like a dead weight during a market down turn. Index investing is more about getting the average performance rather than shooting for higher gains.

    Matt,

    Yes dollar cost averaging can help. The issue for some index investors is if you switch to EFT’s and are only putting in money one a quarter or twice a year. Then you have to really watch when you put in the cash.

    Qcash,

    Yes I wish I had more cash right now to pick up some stocks. The issue for me personally is the cash buffer is lower than normal so I’m going to be sitting on my hands until I can build up a bigger buffer again. *sigh*

    Tim

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