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2 Years to Zilch
Written by Steve | Published: |
I hope you had a wonderful Christmas and New Years spent with your family and friends.
I know our family was blessed with a fantastic holiday season.
When I was a teenager, I loved when my grandma came over or we went to her house, we would have a great time playing a dice game called “zilch” and eating fresh pumpernickel bread.
In the game, zilch, you would earn points by rolling different dice combinations with multiple dice, however if you rolled wrong you could get zero or even worse a reset all the way back to zero i.e. ZILCH.
I still remember the feeling of being in first position only to roll wrong and go all the way back to zilch.
Uggghhhh, it is so frustrating to start over from zero.
I recently had a conversation with a gentleman who was humbly bragging about his recent stock market returns this last year.
I was genuinely excited for him, until I asked a few more questions…
He had gotten off the phone with his stock broker to hear his recent returns in the market.
When I asked what returns he got the year before the phone went silent for a number of moments and this voice totally changed.
His loss the previous year was actually slightly more than his gain last year.
I promised I wasn’t trying to be rude or burst his bubble.
I really just wanted to see what his “track record” was to see if this was normal and expected or if he got lucky.
Sometimes as humans, we have what’s called recency bias, where we overemphasize recent events and forget about past events.
Our longer term memory sometimes seems as effective as Dory on “Finding Nemo”, ha ha.
If you look at the below chart of the S&P 500 Index at the end of 12/31/2021 the market close was 4766 and the market close as of 12/31/23 was 4770
Essentially it took two years to get back to the same place and analysts are currently saying that stocks are “overvalued” and it is predicted to be highly volatile this year.
Unless you have a systematic way (i.e. crystal ball) that allows you to buy low and sell high every market turn, I think we are going to see more of the same ups and downs in the next few years.
So as you are pondering your strategy for growth and protection in 2024 you may want to consider other options that will lock in the gains and protect from losses for you.
