Did You Sell Your Investments Last Year Because You Were Nervous? Here Is Why That Was A Huge Mistake

The consensus coming into this year was bleak:

• Inflation was hovering around 6%.
• Wall Street Strategists predicted a down year for stocks for the first time in decades.
• We were entering an ‘earnings growth recession’.
• Federal Reserve was continuing to raise interest rates, “higher for longer”, and continued their quantitative tightening (decreasing money supply available).
• The Yield Curve remained inverted (typically a recession indicator).
• Layoffs were becoming more widespread.
• Mortgage rates topped 7%.
• Things started to break with bank failures and bankruptcies are on the rise.

How have the markets responded? The complete opposite of what the majority expected, they ripped higher…

Some are declaring the worst is over and we have entered a new bull market. I have no idea how the rest of the year will play out. I would not be surprised if we do see a 10%+ pullback at some point.

That’s just the expectations you should have when investing. Remember this chart:

Very few wanted to invest in the stock market last year and most wanted to stop the bleeding.

I spoke to many concerned investors last year, here are some of the things they said:

“Kyle, I’ve lost 20%, we better get out now before I lose even more.”

“Let’s just wait for the storm to blow over, THEN I’ll get back in.”

“The markets are never coming back.”

“I can get close to 4% on my cash, why wouldn’t we sell all of my investments and just invest in a money market or CD?”

Remember - everyone is playing a different game when it comes to investing.

Some people did need to make changes to their portfolios to ensure they could secure their retirement funds.

But for most, selling their investments to go to cash or stopping their investment purchases all together was the wrong decision.

I’m aware of how uncomfortable and painful stock and bond market declines can feel. They create uncertainty and fear, you feel like you have no control as you watch your investments decline month after month.  

But it’s human emotions that derail investment plans. It’s why the average investor underperforms time and time again.

No matter how many times you pound the table telling people that market pullbacks are common, can be healthy, and they can even provide opportunities for long-term investors!!

They still want to stop the temporary declines, and by doing this, they sacrifice the permanent gains.

There is no free lunch when it comes to investing. Some investors want above average returns without dealing with the ups and the downs. That’s just not practical…

Volatility is the price of admission when you are investing, and history has shown us that it has been worth it to stick around.

I’m sure you were pumped to earn 5% on your cash in that CD or high-yield savings account.

But not nearly as excited when you saw the markets rebound and you could have recouped all your money, and more…

That’s why it’s best to stick to the long-term plan you have built (you HAVE built one right?…)

Rather than always being pessimistic during these bear markets, try and reframe the situation, and view it as an opportunity.

After all, in all other aspects of life, when things go on sale, we gladly buy more.

But not with our investments…

Even though every bear market we’ve experienced looks like a buying opportunity with the benefit of hindsight.

Remind yourself that staying invested can be one of the greatest decisions you can make, even if it feels uncomfortable at the time.

When we go through another bear market, which we will, here are some quotes that might help you:

“People overestimate the risk of holding stocks, and underestimate the risk of not holding them.” - Nick Murray

“You can’t predict, [but] you can prepare.” - Howard Marks

“Fear has a greater grasp on human action than does the impressive weight of historical evidence” - Professor Jeremy Siegel

“The Stock Market is a device for transferring money from the impatient to the patient.” - Warren Buffett

“Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria.” - John Templeton

“The stock market has predicted nine of the past five recessions.” - Paul Samuelson

“The secret to making money in stocks is to not get scared out of them.” - Peter Lynch

“Never bet against America.” - Warren Buffett

“In the short run, the market is a voting machine, but in the long run it is a weighing machine.” - Ben Graham

Disclosure: This material is for general information only and is not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing includes risks, including fluctuating prices and loss of principal.