Flight To Quality

Bear markets occur every few years, and so do "end-of-the-world" crises.  When panic starts, I have no idea when it will end.  What I do know:

(1) The wealth of a society is in the goods and services produced, and not in the monetary system.   Check the stores: they're still open, providing lots of goods and services, and owning shares of the world's most profitable businesses makes your wealth as safe as the continued provision of those goods and services (if they disappear, money is useless).

(2) SOMEBODY has to own stocks at all times: the so-called "flight to quality" actually represents some people panicking out of the true source of wealth and handing ownership of these sources at fire sale prices to other people in exchange for green pieces of paper with pictures of presidents on them that aren't guaranteed to be redeemable for anything.  Someone once described a bear market as "that time period during which stocks are returned to their rightful owners."

(3) The much higher rewards of equities over the long term result primarily from the uncertainty of returns over the short term.  Thank the volatility: it is your best friend in the end.

(4) Diversify, diversify, diversify.  That was the lesson forgotten by the businesses that got in trouble in September 2008.  Don't you forget it: own lots of businesses in lots of industries in lots of countries.

(5) Alternative investments that usually do well when stocks are doing poorly can buy a little piece of mind.  I keep around 30% of my investment portfolio in commodity futures for that reason.  But there is no way to eliminate risk (notice that my diversification didn't do me any good in the late stages of the 2008 crash): ultimately, it is a matter of deciding whether short-term volatility or long-term low returns are the greater risk.

(6) If you think you can time the market to only be in it when it is going up, heaven help you.  I cannot.

(7) There are MUCH better hobbies than following the stock market.  Find one.