Looking Back

Equity, Fairness Equitable, Letters, Scrabble, Equal

Image Source: Pixabay

A year ago the market plunged 34 percent in just 23 trading days as one-third of investors hit the panic button and sold. While some had second thoughts and repurchased stocks, others didn’t. Emotions ran high. Here is what I wrote to my clients last March:

Investors want out of anything that trades. That’s why growth stocks, conservative stocks, bonds, utilities, munis, and gold are under pressure.  Diversification hasn’t worked. Only Treasuries that yield next to nothing have held their value.

I’ve seen this before. I was an investment professional during the 1987 crash, the near bear markets of 1990, 1998, 2010, 2018, and the massive bear markets of 2000-02 and 2008-09. I handled some better than others, but let’s just say this isn’t my first rodeo.

In each case securities were sold to ridiculous levels that made no sense. I’ve learned to never sell into a plunging market that is well off its high.  I won’t sell in that environment. Nope. I won’t be the emotional seller that blindly sells securities acting as if they’ll never come back.

Over the years I’ve seen many investors sell into a panic thinking they’ll buy back at a later time. That rarely happens. If stocks go down the investor only gets more bearish and after stocks go up then he doesn’t want to buy higher than where he sold. Selling is the easy part. Getting back in is far more difficult. That’s why most people that get out of the market won’t get back in.    

The worst-case was priced into stocks last year until the bottom in March, then investors began to change. In this column, I wrote that investors would be well ahead of Covid news events and any sign of improvement would send stocks higher. Investors anticipated the vaccines and pent-up demand that we are now experiencing. Stocks rallied … a lot.

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Disclaimer: David Vomund is an independent investment advisor. Information is found at vomundinvestments.com or by calling 775-832-8555. Clients hold ...

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