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Bankrate found that only 18% of investors plan to boost their stock holdings in 2022, and many signaled that they weren’t going to invest ANYTHING, AT ALL.
In fact, “Nearly 16 percent said that they had SOLD stock investments or withheld further contributions in 2022”….and, this is where we have a problem.
I recently posted an article by the blog, MarketSentiment, that cited research which suggests that – when stocks are DOWN – CONTINUING TO BUY yields greater profits, long term, and that, GENERALLY, the MORE you try to TIME your investments…the WORSE people generally do.
Another study from UC Davis in 2010 concluded that only 1.6% of traders were actually profitable…and, were even quoted as saying: “Persistent trading in the face of losses is inconsistent with models of rational learning”
In fact, during the 20-year timeframe where REITS Oil, and the SP500 averaged an almost 10% return…the retail investor…BARELY managed to outperform inflation…at 2.5%. That’s because, it’s largely summarized that most retail investors are prone to jumping in at peak hype, selling as soon as they’ve lost money, and then repeating the process over and over again…while, proceeding to lose a lot of money.
Plus…the data doesn’t lie: since 1930, had you just missed the top 10 BEST trading days of EVERY DECADE…just because you decide to sell, or “wait” for things to recovery…your return would be 28%…VERSUS 17,715%…IF you just carried on as usual, and DIDN’T SELL.
Even MORE GUT-WRENCHING, is that “Americans in the lowest-income group were also the most likely to be active investors due to inflation, either buying, selling or withholding additional investment due to market volatility.” Or, in other words…the investors who need the money, the most…are the type to make the biggest mistake, and see the lowest overall return.
So, as part of my “Personal Finance 101” rant, I just have to say: regardless of what the media says, regardless of how difficult it is to see your portfolio drop in value, and regardless of what you might THINK will happen…EVERY SINGLE STUDY, throughout the last 100 years, reinforces the fact that BUYING AND HOLDING a well diversified portfolio is the BEST WAY TO MAKE THE MOST AMOUNT OF MONEY…and, GENERALLY…when prices are DOWN, investing MORE leads to higher returns.
Obviously, this doesn’t apply if you’re aggressively buying meme-stocks and random penny stocks you heard about at the casino..but, if you’re in a globally diversified, low-fee index fund…this advice holds true, and – when most people LOSE MONEY…do the opposite, by sticking with a plan and buying normally – regardless of what you think you should you. THAT should help you overcome an otherwise VERY costly mistake…and, HOPEFULLY…make you a LOT of money in the process.
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For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
*Some of the links and other products that appear on this video are from companies which Graham Stephan will earn an affiliate commission or referral bonus. Graham Stephan is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. This is not investment advice. Public Offer valid for U.S. residents 18+ and subject to account approval. There may be other fees associated with trading. See Public.com/disclosures/