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Warren Buffett is attributed as saying "Wall Street makes its money on activity, you make your money on inactivity." Another quote I've seen attributed to several sources is "don't just do something, sit there."

A concept I stumbled onto a long time ago is the idea that the stock market over long periods of time goes up about 7 or 8% a year on average and it's going to have an up year most of the time, about 72% of the time. Recently I learned the fancy word that describes what I'm talking about is ergodicity. If you built a reasonably diversified portfolio and then did nothing ever again, then that portfolio would very likely just go along for the ride either a little ahead or a little behind the market's actual number. If the person building that portfolio maintained a reasonable rate of savings and had realistic spending habits then their odds of long term portfolio success would be very good.

To Buffett's quote, the more actively an investor trades their account the less benefit they get from the market's ergodicity.

Think about any individual stocks that have been around for a while that have generally outperformed. An example from client portfolios is Northrup Grumman (NOC). I go back with that name about 15 years. For 15 years, Yahoo Finance has NOC's return at 416% compared to 205% for the S&P 500. The last few years though has been a much different story with the S&P 500 well ahead of NOC. So after a couple of years of lagging, is it likely that the US government is going to stop increasing it defense capabilities? If you think yes, then sell it but that conclusion doesn't seem correct. No stock can always outperform but that doesn't necessarily mean it should be jettisoned.

Going through this exercise with every holding in your portfolio will yield a series of decisions, some of which will be right and some of which will be wrong. I'd say that is also part of ergodicity, no one can be correct on every decision. Obviously, action needs to be taken for strategic reasons, fundamental reasons (something goes wrong at the company) or personal reasons (life event or other milestone) but there is a line between making necessary changes and over trading.

The difficulty of knowing when doing nothing is the best course of action is most challenged by greed like wanting to chase Tesla and by fear like thinking the current decline (when the market is declining) is somehow different.

Once you accept the premise of the above it makes navigating markets less emotional and hopefully a little easier.