The S&P is 4% from its all-time high.
Four percent. Now go compare that number against the volume of screaming you’ve heard this week.
I’ve never heard this many people complain about a marketplace that’s only 4% from the all-time highs. Have you? Have you ever heard this much fear, at this magnitude, over a decline that small?
The answer is absolutely not.
Pull yourself together, you monkey.
What all that noise is actually telling you
If a 4% decline produced pain that matched the move, nobody would be making this kind of racket. The racket’s disproportionate, which means the damage is disproportionate, and that implies one very simple thing.
Clients aren’t vested toward the S&Ps.
They’re invested heavily toward their AMDs, their Intels, the semiconductor complex. Those are the ones taking the brunt of the hit in this sell side activity, and that’s why the noise level doesn’t match the index.
What that means for you
You want to be in tech, you want to be in AI, fine. But this is what you’re actually going to face, and you’re going to get whipsawed constantly in here.
The television is going to tell you the market’s down 4% while your account’s down a lot more than that, and you’ll sit there wondering why the two numbers don’t line up.
They don’t line up because the index isn’t measuring what you own.
So the next time you feel that gap, don’t waste your time arguing with it. Go look at what’s actually in the account.
That gap between the index and your account has a name, and it’s position sizing.
Most people never do the math on what a bad stretch actually costs them until they’re living in one. I wrote down the five checks I run before anything goes on, and the sizing one is the difference between a loss you shrug off and the loss you don’t come back from.
Sixty seconds to read the whole thing. It’s $29.97 the rest of the year and it’s yours free today.
To your success,
Don Kaufman
