How nouns can help you

Bad news is an investor's best friend.

That seems illogical. And there are qualifiers: it's your best friend if you are continuing to invest. If you are not adding to positions, but only drawing down your investments, this doesn't hold. And bad news can go to worse news in individual stock positions, and unlike index funds, they can go to zero.  But let's assume for the sake of this email that you are continuing to purchase stocks and bonds. And let's assume you are doing so in broadly diversified, low-cost indexes.

As an investor, you are trying to buy future cash flows (earnings + dividends) at lower prices. The low prices come in the form of stock or index quotes, or what people commonly view as the market. People, at least of the genus Homo Sapiens, tend to get happy when markets rise and sad when they fall. They shouldn't. Rising markets just means you pay more today for the same cash flow later.

What your mathematical heart desires is falling prices and rising cash flows, where cash flows are dividends. But how, as an investor, do you buy securities on the cheap?

This is where nouns come in. I want to mention that I'm an equal opportunity linguist, and verbs and adjectives play into this as well.

Last week provided a good example. Here is a screenshot from the front page of Marketwatch.com.

I know you're looking at that Tupperware container and trying to figure out if those are frozen peppers or some type of candy. That's not the point (but for the record, I think they're peppers.) Just in this one screen, we have the words: "hit," "turmoil," "struggle," "woes," "crisis," "shock waves," "selloff," and "carnage."

Words matter. Words comprise stories, and people respond, remember, and react to stories more strongly than numbers. If a negative story emerges, it tends to get attention. In the case of these negative stories, here is what happened to the Vanguard emerging markets index fund last week (down 5.2% in a week):

This was an event triggered by Turkey, affecting the prices people were willing to pay for worldwide emerging markets. And how much of that index does Turkey represent? 0.8% (yes, zero-point-eight percent). It's the fear of contagion that drives investors to sell.

The words create the stories. The stories build the fear. The fear lowers the price. And a good investor considers buying.

Dan Cunningham

Image sources: Marketwatch.com 8/13/16, Vanguard emerging markets index 8/9/18 - 8/16/18

Return to Articles
How We Are Different
Low-fee index funds. Transparent & fiduciary financial advisors.
Local Financial Advisor
We are in your community. We are local.
Investment Management
We tailor to each client. Index funds at the core.
Index Funds
Broad market exposure, low expense.
Dan's Corner
Meaningful musings from our founder.
Fiduciary
Your best interests are our priority.
Low Fees
Our fees are among the lowest in the nation.
Financial Planner
Financial advisor optimizes your financial picture.
U.S. Treasury Bonds
Use Treasury Bonds to reduce risk.
Book Recommendations
Here are some of our favorites
Who We Serve
We work with clients nationwide from all financial backgrounds.
When Should I Invest?
Life transitions = important financial decisions.
Retirement: 401k and More
Retiring? Plan the future you want.
IRA Rollovers
401k Rollovers. IRA Rollovers
Active vs. Passive Investing
We believe there is a winner in this debate.
The Investment Process
How we work: low-cost index funds, personalized attention.
Simplicity
Simplicity is the ultimate sophistication.
Investing: What to Focus On
Low-fee index funds. fee-only advisor.
Switching Financial Advisors
Can be uncomfortable, but an important step.
Advisor Recruiting
We attract top-tier talent. Not your usual firm.
Basic Investing
Let's start with Investing 101.
Understanding Your Financial Statement
Let's break it down to basics.
Taxes on Investments
What causes taxes within your investments?
Behavioral Finance
Nudge vs. Sludge.
Advanced Investing
Let's geek out on stats and figures.
How Financial Firms Bill
Fee-based vs. fee-only, and lots more.
Who Supports Indexing?
Bogle, Swensen, Buffett, and others.
Transparency
One click to see our fees.
Mutual Funds vs ETFs
Clarifying the difference.
Does Stock Picking Work?
The research says no.
Countering Arguments Against Index Funds
What happens in a down market?
Annuities
Lots of fees, little clarity.
How Do Mutual Funds Work?
Invest in the basket.
How to Relieve Financial Stress
New client? anxiety is normal.
Financial Terms Glossary
Common investment terms you should know.
Firm Comparison
One Day In July vs the competition.
Retired Investing
Retiring? Let us help.
Young Investors
Plant a seed, watch it grow.
High Net Worth Investors
Preserve and grow your wealth.
Investing an Inheritance
Prioritizing and planning for the future.
Frequently Asked Questions
Good questions, real answers.
Female Investors
Your voice needs to be heard. We are listening.
For the Business Owner
Choosing what's best for your business.
Environmental Investing
Carbon intensity, fossil fuels.

Locations

Vermont

Connecticut

United States

Services

Individuals

401k Plans

Institutions

Environmental

Account Types

Differentiators

Cash Flows

Low Fees

Fiduciary

Dedicated Advisor

Materials

Advisors: Join Us

Careers

Articles on Investing

About the Secure Act

Quarterly Booklets

Resources

Vermont Investment Management

Vermont Retirement Planning

Vermont Wealth Management

Vermont Financial Advisors

Investment Tools

Shelburne, VT Financial Advisor

Frank Koster | Josh Kruk | Keith McCarthy

5247 Shelburne Rd, Suite #101

Shelburne, VT 05482

(802) 777-9768

Stowe, VT Finanical Advisor

Available for meetings in Stowe.

Peter Egolf

(802) 999-2321

Burlington, VT Financial Advisor

Hans Smith | Katie Muttitt

Nancy Westbrook | Peter Egolf

77 College Street #3A

Burlington, VT 05401

(802) 503-8280

Darien, CT Financial Advisor

Available for meetings in Darien.

Keith McCarthy

(203) 554-9466


v 1.7.21 | © One Day In July LLC. All Rights Reserved.