When to go against the grain
As the article title says, many clients must work to rewire their brains in a bear market. This isn’t easy for everyone to do, and the reason is simple…. Reactions tend to be caused by actions, whether because of the free-fall in the market or the market gaining 10% in a month. When many people see trends in the market, it is easy to go with the grain. But in this article, we will explore why sometimes it is better to go against the grain.
Market on Sale
For the last 14 months, the market has fallen. The market has gone from its all-time high in January 2022 to its lowest point in two years, back in October 2022. Since then, it has been deviating between 10% higher than that and back down to close to the October 2022 levels. So, all that is to say that the market is far from its all-time high, even after 14 months.
For some, it can be tempting to want to jump ship when the market is down. Sometimes we receive calls from clientele wanting to pull their money and hold it into cash, for they do not know how much further the market can go. They start to feel a bit of panic. This is when I tell clients that even in the most significant financial crisis of our age, which happened in 2007 through 2009, the lowest the market ever got was down 40%. In October 2022, the market was down 25%. These current times do not echo catastrophe nearly the same way as 2007 through 2009.
So, what does this mean? It means those who continue to contribute to their accounts and flood their extra cash into investments, and the market will only be that much more ahead of those who are not doing the same. While others are sitting on the sideline until they see the market improve, those who choose to invest and capture the market on sale will be that much more ahead. This is a crucial concept to understand.
Going Against the Grain
The decades-old adage of buy low, sell high seems to be a talking point for most people when discussing investments and timing in the market; however, people rarely abide by that elementary concept. And it is for these two simple reasons: what is low? And what is high? This is all the personal perception and opinion of each client.
When discussing the stock market, we can think about buying low in percentages. If the market was at its all-time high in January 2022 and fell 5%, then you could be buying low. After all, as previously discussed, you would be getting a 5% sale in the market. On the other hand, many people may not feel that is low enough, and the market will go much lower. This is a fair point given that the market at one point this year had fallen to as low as -25%. However, there are always people who miss out on timing this because they never feel that it is the right time.
Knowing how low the market needs to be in order to buy in and how high it needs to be in order to sell are always impossible questions to ask oneself at the time. No one knows the future, everyone’s timeline for their money is different, and everyone’s goals for their money are different. Therefore, buying low and selling high means something different for everyone.
What does it mean for you?
The power of speaking with your advisor
As mentioned, everyone has different goals and timelines with their money, so it is important to speak to a Financial Advisor about your specific needs and goals. Please get in touch with one of the Financial Advisors here at Whitaker-Myers Wealth Managers; we would be happy to help you!
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