What Should Investors Do If They Miss Big Moves?



My Sunday Washington Post Business Section column is out: Missed the big market rally? Here’s what to do now.

In the office, we have been getting lots of calls from people who missed the big move off of the 2009 lows. What should they do in those circumstances?

Here’s an excerpt from the column:

“What do you do now? How to begin to repair the damage?

It is a two-part process: The initial steps are designed to help you overcome your risk aversion — the emotional aspects of investing. Call it your “erroneous behavioral economic zone.” After we fix that big underutilized brain of yours, we can move on to the investment steps that allow you to work your way back into markets.”

Some parting thoughts:

“When your investing timeline is measured in decades, you cannot afford to continually miss an ongoing rally because of day-to-day volatility.

Markets that rally 150 percent come along once a generation. If you missed this one, it is probably because you based your investing on some form of guess as to what stocks were going to do. Experience teaches us that we are all pretty bad at making forecasts nearly all of the time. This is why any prediction-based investment strategy is doomed to failure. The outcome is binary: Your guesses are either right or wrong.

Consider instead a probability-based investment approach. The idea behind asset allocation is to allow mean reversion, rebalancing and diversification to work in your favor. No guesswork required.”

Go read the whole thing here.


Missed the big market rally? Here’s what to do now.
Barry Ritholtz
Washington Post, June 16 2013  

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:

Posted Under