Did You Miss the Rally?

Posted by Sun on October 5, 2007
Post viewed 686 times, 3 so far today

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It feels like it was just yesterday that lot of *advices* were floating around in the personal finance blog community on how you should get out of the markets if the 1000+ points drop of the Dow (the Dow as 14,000 on July 19 and 12,845 on August 16) made you sweating and get up in the middle of the night worrying your investments. Granted, the 1,155 points loss was huge in less than 30 days. But is it the right thing to do to simply get out when you are nervous(or make any dramatic change to your investment strategy)?

If “Get out” was indeed what you have done, you may now in an entirely different mood, regretting your action, as both the Dow and the S&P 500 not only reclaimed all the losses, but also are entering new territories they have never been before.

Sure there’s no guarantee how the markets will perform tomorrow, next month, or next year. It may lose 10% again. But if you have a long term investment plan, it shouldn’t be altered by short term market fluctuations. Adjustments is fine, but upside down change isn’t the right course to take.

You are not a kid. Stop investing like one!

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9 Comments
October 5, 2007

Yes you missed it if you cashed out when DOW was at 12,845 but most people should just keep investing and invest more when the market is down. This advice should not be followed if you think the US market will never recover, in which case you need to move out of the country since your career is probably in danger also.

Posted by MoneyNing
October 6, 2007

Just one more reason not to let emotions get in the way of investing - had an investor panicked they would be pretty sorry today!

Posted by The Dividend Guy
October 7, 2007

Athough I personally stayed invested and benefited, I normally would have sold out in the past. It’s one of the reasons that I have hired a personal advisor to manage a portion of my money. They tend to stay invested, because they are objective and are paid to be invested.

Also, there is a research artcle by Dalbar that shares individual investors in index mutual funds have 3-4% returns even though the market has returned 10% during that time. It turns out inviduals tend to sell when the market goes down and buy when it goes up, reducing their returns.

Posted by Super Saver
October 9, 2007

many of the declines just didn’t make any sense on the companies’ fundamentls, so I emptied out my cash savings and invested in good companies and watched them rise along the way.

Posted by Tim
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