The timing couldn't have been worse for those who just started investing.
Picture this: You finally decide to dip your toes into the stock market after watching the S&P 500 climb like a rocket through 2023. Your friends are bragging about their gains. Your social media feed is flooded with investment gurus flashing profits. So you take the plunge in December—and then January hits you like a cold shower.
"I bought my first stocks in December and now everything's red. Is this normal?" one bewildered newcomer posted last week on an investing forum.
Normal? It's practically a rite of passage.
I've been covering financial markets for over a decade, and if there's one pattern that repeats with almost comical precision, it's this: retail investors pile in just as the party's about to end. It's like they've got a sixth sense for buying at the peak.
The Class of 2024 is just the latest batch of investors to learn this painful lesson. They're getting what veterans call their "market baptism"—a polite way of saying they're losing their shirts.
What makes this particularly interesting (or cruel, depending on your perspective) is how these cycles keep repeating. I remember interviewing shell-shocked first-time investors after the 2020 Covid crash, who had the same dazed expression. Before that, it was the 2018 December plunge. Before that... well, you get the picture.
"Most people enter the market at exactly the wrong time," explained Dr. Sarah Jennings, a behavioral finance expert I spoke with yesterday. "They're responding to what psychologists call recency bias—the belief that whatever happened recently will continue happening."
Look at the data—retail investment inflows consistently peak right before corrections. It happened in '99, '07, early 2020, and... here we are again.
But here's the silver lining (and there always is one in financial journalism): those who stick around after getting punched in the face by Mr. Market often become the most disciplined investors of their generation.
Warren Buffett started his investment partnership just before a market downtown in the late '50s. Peter Lynch took over Fidelity's Magellan Fund right before the brutal bear market of '73-'74. Initial adversity has a way of creating better investors—if they don't run away screaming first.
The problem isn't just financial—it's psychological. What these new investors are experiencing is what I've come to call the "emotional tuition" of investing. The market demands this payment upfront, testing whether you can tell the difference between temporary paper losses and permanent capital destruction.
Can you stomach seeing 20% of your money vanish? How about 30%? These aren't theoretical questions anymore for the Class of '24.
"I thought I was prepared for volatility," one 22-year-old investor told me, laughing nervously. "Turns out reading about roller coasters and riding them are very different experiences."
So what should these baptized-by-fire investors do now?
First—and this is crucial—remember that paper losses aren't real until you sell. The market functions as a voting machine short-term but a weighing machine long-term. Right now, the votes aren't going your way, but fundamentals eventually win out.
Second, maybe (just maybe) this is an opportunity rather than a disaster? If you liked a company at a higher price, shouldn't you love it at a discount? That's assuming, of course, that the business itself hasn't fundamentally changed.
And finally... sometimes doing nothing is the most powerful move. Turn off CNBC. Delete that brokerage app. Take a walk. The market will still be there when you return—I promise.
Having watched multiple cycles of investor panic and euphoria, I can tell you that starting in stormy waters often creates better sailors. Anyone can look smart in a bull market. It's the bears that separate the tourists from the real investors.
So to all the newcomers out there staring at screens of crimson—welcome to the show. It only gets easier from here.
Probably.
