Get ready for the bear market headlines!

We all think we'll invest during a crash, but do we?

A child covering his eyes hiding from a toy bear representing a bear market for ASX shares

Image source: Getty Images

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Oh. Em. Gee!

(That's OMG or 'Oh My God', apparently.)

You've probably seen the headlines.

Yes, it's true.

There have been some huge moves on the ASX.

Seriously big.

The market is all aflutter.

How big?

Again, you've probably seen the headlines.

The ASX is… wait for it…

Up 160%, including dividends over the past decade!

Huh? That's not the headline you meant?

Oh, maybe the one where the ASX is down 2% over the past year?

Yeah, not great. But not terrible.

Oh, not that one either?

Maybe you saw the headline telling you that the share market is up 9% since the pre-COVID crash peak in February 2020?

Missed that one? Me too, actually.

Oh… the ones about the 'official' bear market?

(Spoiler alert: There's no Official Bear Market Authority, so it's not actually an 'official' anything.)

Yeah, the US stock market is apparently now down 20% from its peak.

So that's apparently a thing.

Down 19.9%? No worries, love.

Down 20.1%?

Cue the headlines. Prepare to walk the plank.

The jig is up.

It's official, donchaknow!

We're in a bear market.

Now, a few things, dear reader.

First, as I mentioned above, nothing magical happens between -19.9% and -20.1%.

(Or between 19.99999% and 20.00001% for that matter.)

Nothing changes.

Companies don't stop making widgets. People don't stop spending money (well, other than those freaked out by the $X Billion Wiped Off Market! headlines).

Second, the bear market is actually – and only in hindsight – the time between the peak, 'back then' and now.

Third, and related, the 20% fall has absolutely nothing to tell you about what happens next.

Nothing.

Fourth, people don't start buying shares after a bear market ends.

The act of buying shares – finding value where others aren't – is what actually causes it to end.

Get it?

When (it'll be when) the share market starts rising, we won't get advance notice.

And, just as the beginning of the bear market was 4 months ago, but is being reported now, when the 'bear market over' stories get written, shares will already have risen!

I hope you see the folly of waiting for the headlines before acting.

But am I 'calling the bottom'?

Nope.

Why?

Because I'm neither deluded nor dishonest.

I have no idea when the bear market ends.

I have no idea how long it'll take, or how low shares will go before it happens.

Nor. Does. Anyone. Else.

Don't listen to 'em.

Oh sure, like Fox Mulder (ask your parents about the X-Files, kids) we want to believe someone knows.

That someone can tell us.

That we can find certainty among the washing machine that is the current share market.

But we can't.

And they can't.

You have to make your peace with that.

And then?

Well, let me ask you a question:

Do you reckon the sum total of the Australian (and US, for that matter) stock market will be producing more or fewer things in 5 or 10 years?

And do you reckon they'll be more or less profitable, as a group, by then?

And do you reckon the stock market, writ large, will ascribe a higher or lower value to those profits in 5 or 10 years than today?

Yeah, me too.

Ah, you say, but I'll wait and buy at cheaper prices?

Will you?

See, first of all, my crystal ball is broken.

Will there be lower prices? Maybe.

Or not.

But by the time we know for sure, the market will have gone up… maybe a lot.

That's how these things happen.

Second, ask yourself how much money you put to work in April 2020, when the COVID rout had pushed the ASX to a 38% fall in just over a month.

We all think we'll invest during a crash, but do we?

Third, combine those two thoughts.

The market has slumped, meaningfully… and how much have you 'put to work', versus waiting for lower prices… or for the coast to be clear?

Those very psychological biases are at play… right now.

Which is why overthinking investing can be dangerous to your wealth.

No, not your share prices.

Not the next week's portfolio value.

But to your long-term wealth.

Remember, the market is down very slightly over the past year.

Up 9% or so since the pre-COVID peak.

Up more over 10, 20 and 30 years.

But hey, if you want to give market-timing a go, be my guest.

Me? I'm going to stay invested and keep investing.

Because I think shares are going to be worth a lot more in the next couple of decades – and we don't often get the chance to buy them on sale.

Don't let the headlines – or the lure of trying to be 'too clever by half' lead you astray.

Leave the overthinking to others.

Do the simple things. Well and often.

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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