Key insights
- The author discusses the psychological bias towards bearish narratives and how it can negatively impact investment returns. They advocate for a dollar-cost averaging (DCA) strategy, highlighting its effectiveness and reduced stress compared to market timing. Despite negative news and market uncertainty, the author notes the market's resilience and all-time highs, reinforcing the benefits of staying invested.
We are naturally drawn to bearish arguments because warnings feel protective, while bullish perspectives seem self-interested. Fear often encourages people to wait for the right time, even though history shows that time in the market beats trying to time the market. I have DCA:d every month since I started working 2009, with the exception of early covid around March 2020. I thought the world was changing massively and was wrong.
Bearish arguments may sound smarter in the moment but acting on them can mean missing the long-term gains that come from staying invested. Are we simply wired to give more weight to warnings than to opportunities? I say yes. It's the exact same as how we are more willing to click on articles that generate a negative emotion like anger rather than positive ones. We currently have someone in office manifesting those articles every week, yet the market is at ATH. Nobody knows if the market is higher/lower in the short term but we know that timing the market doesn't work (without insider info). Just DCA, it's the proven strategy and it is also easier mentally than stressing over the current market.