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Abulia — An absence of willpower or an inability to act decisively.
I know of investors who suffer from abulia. They suffer because of fear induced by excessive analysis. They’re unable to pull the trigger because it never seems the right time. Paralysis through analysis is real.
That’s a problem, because there has never been a “right” time. There never will be.
Markets always operate under a blanket of uncertainty. Stocks will always appear too richly valued or too poorly valued. Interest rates will appear too high or too low. The economy will always appear to run sub-optimally, either too hot or too cold.
Geopolitical conflict will always exist. Human history is a running list of never-ending conflict: The U.S.-China trade war, North Korea, Syria, ISIS are no outliers, they are the normal course of events.
Consider all the world events that occurred during the past six decades that could keep investors sidelined: the Cold War, the Korean War, the Cuban missile crisis, two Kennedy assassinations, the Vietnam War, Watergate, 1970s stagnation and inflation, Russia’s bond default, Long-Term Capital Management, the bursting of the tech bubble, 9/11, the bursting of the housing bubble, a banking-system meltdown.
This merely scratches the surface.
If you wait for perfection before delving into the market, you’ll wait in perpetuity. Perfection is of another world.
But you don’t need perfection to succeed. Economic growth is the norm in most of the developed world. Economic growth spurs earnings growth, which spurs wealth creation.
U.S. GDP was $300 billion (in nominal dollars) in 1950. It’s $19.5 trillion today. The S&P 500 index was priced at 25 in 1950. It’s priced at 2,930 as I write.
A lot went wrong over the past 68 years, but enough went right. U.S. GDP has grown at a 2.8% average rate since 1950. The S&P 500 has grown at a 7.3% average annual rate.
Intelligent investors seek conflict and uncertainty. The abulia-inducing events – the conflicts, the uncertainties, (the noise, really) – can produce exceptional entry prices.
But even if you had failed to exploit the contrarian opportunities, you’d be ahead today. You just needed to have acted.
If you had done nothing but bought at major market peaks – 1987, 2000, 2007 – you’d be deep in the black.
Fear and Investing Decisions
Opportunities can always be found, regardless of what frightens investors at the moment.
In late 1999 and early 2000, many consumer-product stocks were cheap, having been relegated to also-ran status due to the technology fever that had swept the country. Premier stocks like Altria Group (NYSE: MO), ExxonMobil (NYSE: XOM), McDonald’s (NYSE: MCD), and even Berkshire Hathaway (NYSE: BRK.a) were priced for failure. The NASDAQ Composite Index was priced for endless success.
Guess which were the better investments over the ensuing decade? It was the former group of stocks. That said, it’s all up – including the NASDAQ Composite – today.
Many investors are nervous today. They want a stock-market retreat, a resolution to the U.S.-China trade imbroglio, more U.S. GDP growth, a halt to rising interest rates. They want the blanket of uncertainty lifted before making investing decisions. They want perfection.
Waiting . . . and Waiting
They wait. If they insist on waiting on investing decisions until certainty arises, their wait will last until the end of their days.
Regardless of what’s occurring in the world; regardless of how overvalued the market might appear, I’m always seeking new investment opportunities, regardless of the macroeconomic backdrop. Many times, I find the best values in the most uncertain of circumstances.
Today, I’m finding income value at home in stocks I have been told are interest-rate sensitive. I’m finding even more it abroad – namely, in shunned emerging markets.
There is always value if you’re willing to seek it. There is always the opportunity to build wealth if you are willing to act on what you find.
Don’t let abulia hold you back in investing decisions. Get in the game. If you don’t, don’t cry foul over failing to achieve success. Doing nothing guarantees failure.