Fidelity Investments just revealed that during the recent downturn 401(k) participants have been making a record number of calls, over 4 million. Many of those calls involved selling out of their equity based funds. This is further evidence that do it yourselfers do not have the discipline necessary to become successful investors.
As I have said many times in the past there are three simple rules of successful investing. Own equities along with the right amount of high quality short term fixed income for you…globally diversify…rebalance.
The problem with this formula is that most people are not emotionally equipped to deal with market turbulence, both up and down.
There is a study that states 70% of 401(k) plan participants that work with a retirement adviser are on track for a successful retirement. While just 28% of participants that do not work with an adviser are on track.
A good adviser will not allow their client(s) to panic and sell during the inevitable downturns of the equity markets.
Below is a great article that helps provide credibility to the statement that discipline wins.
Although many people will nod their heads after reading the tips in the article. Most will allow their emotions to take over and sell during down markets.
Are you one of the people to panic?
Or do you have an investor coach/fiduciary adviser to help you through the turbulent markets?
CNBC article by Fred Imbert
Investors thinking of selling amid the current market turmoil should resist the urge, Vanguard Group founder Jack Bogle said Wednesday.
“Just stay the course. Don’t do something, just stand there. This is speculation that we’re seeing out there, and you can’t respond to it,” the investing legend told CNBC’s “Power Lunch.”
Bogle made his remarks in the midst of yet another sell-off in global equities.
The Japanese Nikkei 225 tumbled nearly 4 percent and closed in bear market territory. In Europe, the pan-European STOXX 600 index fell more than 3 percent.
U.S. equities inched closer toward bear market territory, with the Dow Jones industrial average falling more than 450 points Wednesday, while the S&P 500 and Nasdaq composite fell about 3 percent.
At the center of the sell-off was U.S. oil, which plunged nearly 8 percent Wednesday, hitting a fresh 2003 low.
“Each bubble, for lack of a better word, is different from the previous bubble. The dotcom bubble back in 1999 into the beginning of 2000 was a whole lot of ridiculously overpriced new companies, only probably 15 percent of which made it,” Bogle said. “The mortgage bubble was because a lot of people had mortgages, and weren’t able to pay for them.”
The recent fall in stocks and commodities, particularly oil, has raised questions as to whether or not the economy is at risk of entering a recession. Bogle said the long-term relation between the economy and the stock market is very tight.
in the short term, however, Bogle said: “Nothing has changed.”
“In the short run, listen to the economy; don’t listen to the stock market,” he said. “These moves in the market are like a tale told by an idiot: full of sound and fury, signalling nothing.”