Behavioral Finance

Keep Calm and Carry On

Ron Gambassi
September 16, 2015

Keep Calm and Carry On was the saying on a motivational poster created in 1939 by the British Government. It was intended to keep the spirits of the British citizens from plummeting in the face of air attacks from the Luftwaffe and risks to the lives and businesses of the British people.

Ironically, over 2 million Keep Calm and Carry On posters were printed, though very few actually got posted in public. No one knows exactly why. That is, since about the year 2000 when one of the original posters was found by a used bookstore owner in England. Shortly after the owner framed and hung the poster he realized it caught the attention of a great many people. So many, that the bookstore owner started selling copies of the poster. A series of the original posters even appeared on the Antiques Roadshow.

Lo and behold a cottage industry was born. Since 2000 there have been variations on that theme in all corners of life, work and play. Soccer shirts adorn the “Keep Calm and Play On” (play-on is a phrase often uttered by the soccer referee to ignore an apparent foul), tea lovers wear “Keep Calm and Drink Tea”, and shopaholics are especially fond of, “Keep Calm and Buy Stuff”.

The “keep calm and carry on” theme fits nicely into the world of the individual investor. Interestingly, the posters were rediscovered in 2000, which happened to be the year the dotcom bubble burst. KCCO turned out to be very good advice for those of us owning real companies in those days.  If you owned, and a host of others, your portfolio took a shellacking. For everyone else, remaining calm when the bubble burst turned out to be a money making decision. Of course, 2008 was a painful lesson given the emotional toll a 30% decline in the stock market has on individual investors (and no less a toll on those of us entrusted to manage your money).

Staying the course since the March 9, 2009 stock market bottom of the “great recession” turned out to be a brilliant investing strategy. Up until this recent “correction”, (officially a 10%-20% decline in the market), we have enjoyed an S&P 500 that increased over 200% (including dividends) since the March 9, 2009 bottom.  In fact, Kiplinger’s, the well-known and respected financial publisher tells us stock market corrections happen every two years, on average.

We had something like this correction occur in 2014. At that time I remember an interview with John Bogle, the 86 year old founder of Vanguard. He’s lived through his share of market corrections. His advice to investors, “don’t just do something, stand there”. While our philosophy may not be quite as passive as what Bogle suggested (i.e. we still advocate rebalancing portfolios per a defined strategy and timeline) it certainly is no time for knee-jerk reactions.

So what’s an investor to do?

Since everyone reading this article is not at risk of bombs coming through their living room ceiling (as was the case in 1939 London). I suggest the British Government had it right.

Keep Calm and Carry On. Oh, and turn off CNBC.

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