Hindsight is always 20⁄20 and today I want to review a BIG mistake I made to a long position in XLV. This is a mea culpa post that further reinforces my belief in passive investing. In some ways, these ‘where are they now’ posts are very enlightening and you can only do this if you’ve been blogging for as long as I have.
Back in 2007
In May of 2007 I posted about going long in XLV sometime in January 2007 for a price of about $34 a share. I don’t remember the exact price but I got stopped out (or sold) quickly later on when the markets crashed. This was right around the market implosion of 2007 and 2008.
XLV cratered somewhere around $23 at it’s lowest point.
Today XLV is trading around $101 and had a wonderful long term rebound in the markets since it’s low.
Sure there was a blip for the Covid19 outbreak but I was a major dumbass here. I shouldn’t have sold back in 2007 and bought more instead BUT I didn’t have the money at the time AND I was scared. We all were scared. The entire economy was being ripped apart back then and it seemed like financial armageddon. So like I wrote above, hindsight is 20⁄20.
The Solution? Use Passive Investing
XLV is an ETF, which means you usually buy them like a stock. You have to pay commissions every time you buy some shares. That gets expensive and one of the big rules in passive investing is to keep your expenses low. However, there were lots of healthcare-focused mutual funds that you could’ve dollar cost averaged in. This way your small investment can survive major downturns and over time you lower your overall cost of ownership by buying less when the price is high and more when the price is lower. Even if I had dollar cost averaged 10 shares of XLV every quarter, I would’ve made a lot of return from 2009 on. Sigh.
You can argue that no one knew what would happen to the markets back on 2007-2008 and I’d agree with you but looking back at it now, the companies that made up the XLV ETF had some intrinsic value and they would’ve never, in aggregate, all gone to $0. If they did then we’d have a global survival problem. Instead we should all be building gardens, buying guns and toilet paper, and figuring out how to brew beer.
The moral of the story is that markets are always rigged but you can win if you approach it with a long term mindset. You’ll win in aggregate, but it takes time and lots of diversification. In my case, I lost 13 years of appreciation because I was too short-sighted and blinded by ‘making easy money’ of the markets.
Don’t let this happen to you. Yes?
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