Your Most Valuable Investing Tool in 2022 Could Be Discipline
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What is the main topic discussed in this episode?
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Here's your money briefing for Wednesday, January 12th. I'm J.R. Whalen for The Wall Street Journal. 2022 is off to a rocky start on Wall Street. And while the sharp gains and sell-offs we've seen might lead some investors to grab their phone and hit the trade button, the best approach to protecting your holdings might be to take a step back and exercise some discipline.
What every investor wants is good ideas, you know, the next Google, the next Tesla, the next hot stock or other financial asset. But what we all need more than good ideas is good habits.
Jason Zweig writes the WSJ's Intelligent Investor column. On today's show, we'll ask him about the most effective habits of the most disciplined investors. That's after the break.
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What market context sets up the discussion about discipline for investors in 2022?
The S&P 500 had a great year, returning nearly 29% in 2021, counting reinvested dividends. That's the seventh highest gain in the past 50 years and the third straight year of strong growth. That's good news for your portfolio and your 401k. But what does it tell you about the market in 2022? Not as much as you might think. But what WSJ Intelligent Investor columnist Jason Zweig does know is the key to protecting your holdings could be a healthy dose of restraint. So how do you stay disciplined coming off a year like we just had? Jason joins us now to discuss. Jason, thanks so much for being with us.
Great to be with you, JR.
So, you know, Jason, for the past couple of years, people have poured money into the stock market. There haven't been very many places besides stocks to see such strong gains. So what's different about this year?
Well,
The stock market faces some really obvious headwinds or at least perceived headwinds. You know, inflation is very high, much higher than it was a year ago. Interest rates are poised to rise. At least that's the way everybody perceives it. And, of course, we're now facing a resurgence of coronavirus. So it's easy to get strong conviction on those ideas and maybe take action that might or might not turn out to be the right decision.
Yeah, and as we've just seen in the past few weeks, each of those factors can give the market fits and cause some investors to make quick decisions when maybe buy and hold could be the way to go to protect their stocks or 401k.
One of the secrets about the buy and hold investment philosophy is that people tend to criticize it for any short-term setback while ignoring the incredible long-term power it has over the course of decades. You know, in 2008 and 2009, there were a lot of people ridiculing the buy and hold approach, but it really redeemed itself in the decade to come. And I think that brings us to another point, which is what every investor wants is good ideas, the next Google, the next Tesla, the next hot stock or other financial asset. But what we all need more than good ideas is good habits. Because investing successfully over the course of a lifetime is much more a function of how you behave in general than it is over one particular hot idea that might have you all excited now, but you won't even remember decades from now.
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