Sentiment plays an enormous role when it comes to investing, when people throw in the towel and panic you can forget about studies, stats, history, etc., everything takes a back seat. Unfortunately, decisions are made by the mass when they reach a point when they can no longer take the pain. That is normally at the tail end of the move. When this happens, it takes them a long time to trust the market again. The charts below help you visualize what all investors go through.
By no means do I want you to look at these charts and say; “I’m going to hold my stock portfolio to the very end, it will come back.” A majority of stocks don’t come back, indices do. “The Russell 3000 index measures the performance of the largest 3000 U.S. companies, 98% of the investable U.S. equity market. 40% of the stocks had a negative return over their lifetime, 20% of stocks lost nearly all of their value, 10% of stocks recorded huge wins over 500%. 80% of the gains are a function of 20% of the stocks. –The Ivy Portfolio
- You need to learn how to live to fight another day.
- Acceptance is key to a long-term investing career. You will be wrong, accept that fact.
- Don’t fall in love with individual stocks, they are nothing but pieces of paper.
- I need to liquidate has no idea who “a good company” is. When panic sets in, the good companies go down the same waste line as the bad ones.
- I know you heard this one before; “The market will stay irrational longer than you can stay solvent.”
My name is Frank Zorrilla, a Registered Advisor in the State of New York.
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