Why you are the best person to manage your own money

The bear market rally seems to have fizzled – but not before sucking in many investors who should know better, including fund managers. John Stepek looks at why you should avoid falling victim to the City's short-term focus and manage your own money.

By John Stepek

published 21 April 2009

in Features

The big bear market rally hit a bit of a speed bump yesterday.

A recent spate of decent-looking results from the banking sector and some "less bad" economic data has helped fuel optimism over the past month or so. But Bank of America injected a big dose of reality as it warned that bad debts had tripled over the past year, as consumers continue to suffer.

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So why the big rally in the first place? Well, the whole surge demonstrates that investors still haven't been completely shaken out of bullish mode. There's that real desire to go 'bargain-hunting', and get back into the market, and to write off bad news far too quickly, that characterises the slow death of the bull mentality. But until that instinctive bullishness gives way to despair, the markets are unlikely to hit their true bottom.

But the thing that makes bear market rallies so powerful, is that the longer they go on, the more likely they are to pull in a lot of otherwise sceptical investors. It's hard to maintain any sort of strong conviction when the market is in such a confused state. And that means that as stocks keep rising, there's a growing sense of panic from those investors still sitting on the sidelines. The longer a rally goes on, the more people begin to worry that it's the real thing, and that they're wrong to maintain their bearishness. The more gains they lose out on, the more tempted they become to throw caution to the winds and pile in.

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.