Market Pullback Investing: Don’t Follow the Herd, Swim with the Beavers

Sometimes the best financial advice comes from unlikely places and sources. Some of the best advice I ever got about investing in a market pullback came from a beaver. An MIT Busy Beaver.

Back in my graduate school days, one of my fellow students had gotten their MBA from the Massachusetts Institute of Technology (MIT). I was quite impressed. MIT was recognized as on of the top MBA schools in the country (and still is!). She was rather humble about the experience. She said that most of the large accredited business programs around the country use the same textbooks and most follow a similar curriculum.

The difference, she said, was that at MIT the professors that taught the classes wrote the books.

She used the example that at MIT, Dr Paul Samuelson taught the MBA level economics course. Dr. Samuelson wrote one of the most widely adopted graduate economics textbooks. In 1970, he became the first American to win the Nobel prize in economics. That’s one impressive teacher!

Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.-Paul Samuelson

As part of a lecture, Dr. Samuelson had discussed his investment philosophy. Historically, the investment markets have always rebounded. By selling your investments in a down market, you simply convert your economic losses into true accounting losses. By holding the investments, the economic losses stay paper losses As the markets rebound, your paper losses are no longer losses.

Seems like a wise investment philosophy. Patient investors have been rewarded when they wait out a market pullback. Panicky investors have paid dearly. If you start selling, you are turning your unrealized losses into actual losses.

You are running with the herd.

Your portfolio will be in a much better place if you swim with the beavers.

Image courtesy of MrWildLife at FreeDigitalPhotos.net

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