It's Just a Phase

| June 07, 2022

Parenting is tough. Those unruly, messy and disorganized kids of ours would find it so much easier if they would just do their homework, clean their rooms and, even if they try for just for one day, stop talking back. If only they’d listen to us! We have all—well, most—of the answers, if they’d…Just. Stop. Yelling. For. Just. One. Second. Please.

But how thoroughly have we forgotten that we, too, were kids? Our parents had all—well, most—of the answers too. Who among us never had a messy room, skipped a chore or two and, well, was there any reason for us to dress like we fell off our skateboards every day? And how sullen we were—at least that’s how we acted. Our emotional thermostats were supposed to always be glued at “cool.”

Eventually we learn that everything is always changing, kids more so than adults. Though sometimes we parents need to act quickly, most of the time it’s best to be patient and simply wait it out. Children and especially teenagers must go through their phases.

That’s good and necessary. We don’t want our future 40 year old kids to leave Legos on our living room floors forever, do we? Our reward will come from our grown kids laughing and empathizing about how they drove us nuts, and we will earn everlasting grace when we laugh with them and let them off the hook.

Markets, too, are always in that process of discovering themselves and, like adolescence or the Terrible Twos, they can be a bit unruly while they work things out. Just as kids engage with a confusing world by changing their style and vocabulary from time to time, financial markets are trying to discover price. They (like us) are seeking equilibrium.

When there’s change or uncertainty, markets adjust. And, like kids often do, markets can overcompensate. There is one difference between stocks and children though: if a stock or bond becomes too wild, we can sell it. Last I heard, the law frowns on us doing that with teenagers. Still, the job of an investor resembles that of a parent: we should intervene only when necessary and trust the markets to reward patience.

That, too, can be tough. Most parents I know never feel they parent perfectly, and I don’t think there’s ever been an investor who has perfectly bought at the low and sold at the high every time. But most kids will come out okay despite our parenting mistakes, and most portfolios will do okay too, provided we know and follow the basics.

Just as we can always worry about our children, there will always be reasons to worry about the markets. Most of that concern is pointless, just like arguing with kids about their hair. Save yourself the agita. Keep your eyes on your investments during these volatile times, but also understand that sometimes they are just going through a phase. You can wait it out. Your parents did.