October 28, 2019
Think you can time the market?
October is notable for the many stock market crashes that occurred in this month. It's the 90th anniversary of legendary Crash of 1929. The Panic of 1907 and the October 1987 crash are other examples. But the month is not the point. Too many investors think they will cash out then jump back into the market after it recovers. Such a strategy guarantees selling at the bottom and buying near the top... not a way to get rich. Just as market crashes are sudden, unexpected and dramatic, so, often are markets recoveries. No one sounds a horn when the stock market bottoms out to announce the beginning of a recovery. "Trying to sit out a crash often means missing some of the market's best days" which come in fits and starts, no on a smooth trajectory. Numerous studies have revealed the penalties of sitting on the sidelines and trying to decide the best time to buy. Putnam Investments figured that "missing just the U.S. markets' 10 best days in the 15 years through 2018 would have cut your ending portfolio in half. Missing the 20 best days would leave you with two-thirds less" reports Spencer Jakab in The Wall Street Journal, 10/26-27/2019. Money you will need in the coming 5 years should not be invested in stocks. It was sad to hear about retirees bailing out of stocks in 2008 to early 2009, thus locking in huge losses. The longest bull market started on March 9, 2009 but those who panicked lost out by sitting on the sidelines after the trauma of inflicting large losses on their portfolio.