Inevitable collapse? You guys need to take some Xanax!
People are way too quick to try to attribute one day’s results to a specific news article. I don’t think it’s possible to attribute the stock market’s rise or fall to one specific thing. The authors writing those articles have to fill a lot of empty webpages, so they write a lot of crap to try to explain the stock market’s movements. I’ve seen plenty of articles saying “stock market is up because traders are bullish on the economy”… and then the market turns in the afternoon and the stories are revised to say “Fears economy is overheating worry traders.” They’re just making shit up.
And a 3% fall is nothing to get worked up about - though interestingly enough I did read that this fall dropped the indexes into negative territory for the year.
I know we will get a big drop sometime soon (I don’t call it a “correction” because that implies that the current value is incorrect and it should be lower, and I don’t know who in the world can tell you where the stock market SHOULD be). Yeah, we’ll get a drop. But when? I don’t know. You don’t know. The dude on TV doesn’t know. You can say “the market’s been going up so much it’s bound to go down soon” - but markets don’t respond like that. You might think the market is irrational, and maybe it is, but it’s not like one day traders wake up and say “omg, we’ve been irrational… sell everything!” Lots of factors play into that, some macroeconomic things we can plainly see (rising interest rates, trade conflicts), some we don’t see so well, some microeconomic things we don’t see, and who the hell knows what else (some new automated trading strategy introduced by a new group of traders).
I’m sure many will disagree but I firmly believe it is wrong to pull money out of the market in anticipation of that drop. You’ve got to get too many things right - timing the sell, timing the buy, worrying about tax implications. If you did it in 2007 and it worked, well, bully for you. You can make the wrong choice and have it work out … that doesn’t change the fact that it was the wrong choice.
As they say, “time in the market beats timing the market.” Which means sitting around with a big pile of cash is not the best strategy. Especially if your retirement timeframe is 5 years or more out. You shouldn’t be screwing with your money if you’ve got it invested and you aren’t retiring for a while.
I saw a chart from… Fidelity maybe? And perhaps it’s been posted here… showing how if you missed the top 30 days of gains over the period of like 2009-2018 that instead of around 20% annual gain your gain would be only something like 1.5% (imaginary numbers but work with me here!)… and showing how something like five of the best days came within 3 days of five of the worst days. So if you sell your stuff when the market goes way down, you can very easily miss a big recovery. And you don’t want to do that. So stop jumping in and out of investments!
And Fidelity did another study where they measured the gains of portfolios under different types of management (active vs passive). The people who did the best were the people who forgot they had an account and (therefore) didn’t change their account after they initially invested! That’s right, the forgetful dummies did best. Because actively moving in and out of investments is, for the vast majority of people, a losing proposition.
I’m closing in on retirement, so believe me when I say I don’t want to see a big market crash. But I’ve got my allocation to a comfortable balance between stocks and bonds, and even if we have a smash up affair, I think I can weather it.