Today is one of the days. The markets are cracking and all you can think about is that you should have been less greedy and taken some chips off the table.

Today I’m not going to go over some charts and explain why this is happening, or tell you when this correction will end. Today is not for numbers. I will save that for my next note.

Today is more about managing your emotions and putting things into perspective.

I am feeling the pain as most likely you are as well. It does not matter that I have been a professional investor for over 30 years and witnessed the 87 crash, the bursting of the TMT bubble in 2000, and the Great Financial Recession of 2008. It does not matter how many times we’ve been through these periods of market stress, it’s never pleasant nor easy to deal with.

Yes, we all know and expect from a rational standpoint that capital markets can recover and resume their upward path, but the pain can be intense in the short term.

In the wake of the recent market downturn following the July 16 peak of the Nasdaq and S&P 500, many investors find themselves grappling with a familiar yet painful emotion: regret.

The swift rotation from high-flying tech stocks to safer, value-oriented investments, coupled with overall market losses, has left many questioning their decisions and battling the "what ifs" of missed opportunities.

The Sting of Hindsight

Regret in investing often stems from a belief that we should have known better.

The bullish run in technology stocks created a fear of missing out (FOMO) that drove many to overlever their positions or ignore traditional valuation metrics.

As the market corrects, the pain of these decisions becomes acute, leading to self-doubt and emotional distress.

Understanding Market Corrections

A market correction is typically defined as a decline of 10% or more from recent highs. Corrections can be either technical or fundamental in nature.

Technical Corrections: These are driven primarily by investor sentiment and market dynamics rather than changes in underlying business fundamentals. They often occur when investor pessimism becomes extreme, leading to overselling.

Fundamental Corrections: These are based on changes in the underlying economic or business conditions, such as slower growth rates or declining profits.

It's important to note that as of now, it's too soon to tell whether the current correction is primarily technical or fundamental.

Markets are complex systems influenced by numerous factors, and it often takes time for the true nature of a correction to become clear.

Strategies for Different Types of Corrections

How investors should respond can depend on the nature of the correction:

For Technical Corrections:

• Stay invested or consider buying opportunities, as prices may rebound when sentiment improves.

• Focus on high-quality companies with strong fundamentals.

• Use dollar-cost averaging to take advantage of lower prices.

For Fundamental Corrections:

• Reassess your portfolio allocation and consider shifting to sectors or companies better positioned for the new economic environment.

• Look for companies with strong balance sheets and sustainable competitive advantages.

• Consider defensive stocks or sectors that tend to perform better during economic downturns.

When Uncertain:

• Maintain a balanced approach, avoiding extreme actions in either direction.

• Continue to diversify across sectors and asset classes.

• Stay informed about economic indicators and company earnings reports to gauge the direction of fundamentals.

Learning from the Experience

While regret can be painful, it also offers valuable lessons for creating a more resilient investor:

Diversification is key: A well-balanced portfolio can help mitigate losses during sector-specific downturns.

Emotional discipline: Recognize that both greed and fear can cloud judgment. Develop strategies to maintain objectivity.

Regular rebalancing: Periodically reassess and adjust your portfolio to maintain your desired risk profile.

Long-term perspective: Remember that market corrections are normal and often temporary. Focus on your long-term financial goals.

Moving Forward

The pain of regret, while uncomfortable, can be a powerful teacher.

By analyzing our mistakes and implementing more disciplined strategies, we can emerge as stronger, more resilient investors. Remember, the goal isn't to avoid all losses—that's impossible—but to build a robust approach that can weather various market conditions.

As you reflect on recent market events, consider how you can use this experience to refine your investment strategy and emotional responses. In doing so, you'll be better prepared for future market cycles, armed with the wisdom that comes from navigating challenging times.

As for myself, yes, I regret not taking more chips off the table. I wish I had been smarter and seen the writing on the wall.

I wish that I wasn’t feeling this way, but I also know that as an investor you’re always playing the percentages of staying the course and going with the flow versus being the lone wolf that jumps ship when everybody else is having fun.

I have always felt that when markets go into tailspin there is nothing you can do or should do. You should not sell out of your investments at this point. It’s all noise, not enough signal at the moment.

Rather, reflect on your other sources of wealth - your family and friends, your home, your professional and personal pursuits, your emotional fortitude, and your health.

Today I am grateful for my family and friends, my health, and my ability to help others pursue a great life in retirement, enjoying the sun and being part of the universe.

Thanks for reading!

What’s Coming on Premium Wednesday😀 

• Asset Allocation Performance - Portfolio Implications

• Where we stand in this correction

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