Wednesday, November 13, 2013

What are “Mom and Pop” Doing?

One of the main tenets of stock market investing is that the professionals are market leaders, and retail investors are laggards.   The convention wisdom is that when normal people rediscover the market, it’s time to sell. 

Josh Brown, @reformedbroker, is quick to make fun of all sides of the market debate, and he had a tweet, “what are “Mom and Pop” doing today so I can do something different.  He is being funny, of course, playing off the idea that individuals are always late to the party when it comes to the stock market.

My tongue in cheek reply was “laundry.” 

As I thought more about it, it was more insightful than I even planned.  Mom and Pop aren’t thinking much about the market.  They don’t care if it has hit a top.  They likely don’t even know it is at an all time high.  If they look at their investment account statements, they know that they have more money than they did before, but they don’t think much about the why.   People I know are grateful for the bigger balances, but just assume it will go down sometime in the future and they need to keep piling money in so they will someday be able to retire. 

The lesson is, don’t take into consideration what Mom and Pop are doing.  They aren’t thinking about the market anyway. 

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