Russian Invasion of Ukraine Needn’t Change Stock and Bond Investing

Professor Thaler, who was an author of the book “Nudge” and appeared as himself in the movie “The Big Short,” is one of the world’s great authorities on how humans behave when they make financial decisions. I got to know him well in the dozen years when he wrote Economic View columns for The New York Times, and on Wednesday night I called him. I wanted to help the readers I’ve perplexed, and asked what advice he would give. A story about market timing “You can tell the following story,” Professor Thaler said. “I was interviewed by one of the financial news networks on one of their morning shows, and they asked me, ‘What should people do the next time the markets are getting very volatile?’ I said my advice would be to turn off this channel and switch to ESPN.” That’s not a great thing to say to financial journalists, I said. “Right,” he said. “They switched immediately to a commercial.” But while he was kidding, he added, he was also serious. Follow the news, of course, and let your emotions flow. But don’t let them affect your investment decisions, he said. For that, be calm and stick to a plan. If you don’t have a good plan, then build one dispassionately. “My thing is, that we know that any sudden moves by individual investors are certainly no more likely to be right than wrong,” Professor Thaler said. “If anything, they’re more likely to be wrong than right because our instinct is to sell when markets go down and to buy when they go up — and buying high and selling low is just not a good strategy.” The news right now is worrisome. But is it a good time to sell — or to go against the tide and search for bargains? It’s hard to tell, and while there are a lot of opinions out there, no one really knows. That’s why moving in and out of financial markets — “timing the market,” as the jargon goes — is impossible to do well consistently and over long periods, much academic research shows.

Russian Invasion of Ukraine Needn’t Change Stock and Bond Investing

Professor Thaler, who was an author of the book “Nudge” and appeared as himself in the movie “The Big Short,” is one of the world’s great authorities on how humans behave when they make financial decisions. I got to know him well in the dozen years when he wrote Economic View columns for The New York Times, and on Wednesday night I called him.

I wanted to help the readers I’ve perplexed, and asked what advice he would give.

A story about market timing

“You can tell the following story,” Professor Thaler said. “I was interviewed by one of the financial news networks on one of their morning shows, and they asked me, ‘What should people do the next time the markets are getting very volatile?’ I said my advice would be to turn off this channel and switch to ESPN.”

That’s not a great thing to say to financial journalists, I said.

“Right,” he said. “They switched immediately to a commercial.”

But while he was kidding, he added, he was also serious.

Follow the news, of course, and let your emotions flow. But don’t let them affect your investment decisions, he said. For that, be calm and stick to a plan. If you don’t have a good plan, then build one dispassionately.

“My thing is, that we know that any sudden moves by individual investors are certainly no more likely to be right than wrong,” Professor Thaler said. “If anything, they’re more likely to be wrong than right because our instinct is to sell when markets go down and to buy when they go up — and buying high and selling low is just not a good strategy.”

The news right now is worrisome. But is it a good time to sell — or to go against the tide and search for bargains? It’s hard to tell, and while there are a lot of opinions out there, no one really knows.

That’s why moving in and out of financial markets — “timing the market,” as the jargon goes — is impossible to do well consistently and over long periods, much academic research shows.