Perhaps they were worried about:
– The wars raging in the Middle East and Europe,
– An imminent recession
– The seasonally tough time of year,
And knew they could get 5% in a money market fund so thought,
Why bother with all this volatility?
Well I’ll tell you why they should “bother”
Because there aren’t any billionaires who got rich from cash savings accounts
And, less than a month later, it seems they’ve left nearly 9% on the table,
Equal to TWO years of money market returns!
Now I can’t blame them for knowing those risks, they aren’t alone,
But that’s just it.
If YOU know the risks, maybe EVERYONE knows the risks, and then …
Maybe it’s already in the price.
But now imagine their dilemma when those risks change/subside
Because they will “anchor” to their selling price
Meaning they’ll stay uninvested when it’s higher
And probably won’t buy when it’s lower
Do you know why?
Why?
Because bears ALWAYS think it’s still got more to fall
And then when it bottoms and rallies, they won’t buy either
Why?
Because they’ll have missed the bottom which will be a new “anchor”
And that’s the problem with market timing – you have to get EVERY decision perfect or you get anchors
Think about it, you can:
Sell too early or sell too late
And
Buy too early or buy too late
Now what are the odds of part-time participants getting EVERY call right, when professionals glued to their Bloomberg screens for 18 hours a day can’t even nail it consistently?
And I’m not talking about people who have their “finger on the pulse”, I’m talking about professionals who are “wired to a market ECG!”
Yes, but the market is expensive
I know, but then DON’T BUY THE MARKET
Maybe go and find a Value fund with a high “Active Share” that looks nothing like the market
That way at least you stay invested but NOT in the expensive stuff
How did you feel in 2022 when Growth collapsed?
I was irritated that I hadn’t taken at least SOME profits and switched to Value – I KNEW it was expensive
Like now?
Yes
Ok, so now that it’s rallied, how do you feel about switching at this point?
I’m hesitant, just in case the Magnificent Seven carries on being … Magnificent…
Yes, I thought that might be the case…
Well I’ve learned you have to do what feels difficult
And when you get an “opportunity” aka a “get-out-of-jail-free-card”, you better act fast
or Greed and the Anchors will drag you down
Imagine someone who panicked after seeing the 3-month, -9.6% pullback, and redeemed from their equity funds at the end of last month
I