New investors' angst

Investing
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I am on Reddit r/fidelityinvestments all the time. I saw a post yesterday that just caught my attention.

"My account has lost 4%, when should I start to worry about it?’

Lots of posts about people cashing out their retirement accounts because they need the money. They didn’t do the baby step of having a actual emergency fund. They literally took their cues to buy stocks and ETFs and open a Roth IRA from Instagram influencers based on a F.I.R.E. dream / retire at age 45 (good luck), and now they’re committing behavioral mistakes because they didn’t have a slightly wider view of how stocks / stock funds and retirement accounts fit into the context of their lives. They were just following influencers.

BTW, here is where the Magnificent Seven stocks sit relative to their 52 week highs:

Apple -7.8%
Microsoft -9.7%
Alphabet -11.2%
Amazon -9.7%
Nvidia -26.3%
Meta -14.7%
Tesla -20.2%

Will these be higher in a decade? Most probably. Will today’s “diamond hands” be able to hold through the volatility that always follows a stunning bull market? I doubt it.

I’m not making stock market predictions, I am making predictions about human behavior. Easy to do, because people are very predictable (in the aggregate). Individuals learn, but groups of people? Nah!

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If you think about it, the prices and volume of the the stock market are always the result of human behavior.

Humans are the ones who make the buy/sell orders and humans create the systems and algorithms that execute them as well.

Things like natural and man-made disasters, wars, crime, etc. are just triggers that set off human actions.

In the end, it is humans making the decisions. The are also the creators of the stock market that they control.

The best book ever written on human decision-making is Daniel Khaneman’s “Thinking, Fast and Slow.”

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Indeed, the machine and algos are just projections of our own minds.

My real bone to pick is with influencers. I can’t stand them. It’s not that they have an opinion and express it… that’s fine… but many of them are getting paid to express an opinion, but the audience doesn’t realize that (or doesn’t care) that they are “not a fiduciary”.

To me, it’s a form of predation. As always, I suppose.

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As long is there is money to be had, predation, both legal and illegal will be with us.

As active participants in the market, our natural inclination is to fight government controls to prevent unfair advantages by bad actors.

Those disagreements usually revolve around a balance between taxes to support the regulatory authorities and the creation and enforcement of what’s fair and what’s not.

The power to influence can be purchased with money, the ability to make money can be enhanced with power to make the rules.