Many investors could be scared of market volatility right now. But those that allow the fear to keep them from investing or to force them out of the market are making a mistake. If you wait and miss the rebound, you’re like to miss out on a lot of gains. And in any kind of market, said Burt Malkiel, the famous economist, the move that gives you the best odds of getting rich is the most basic: Start investing.
- be scared of market volatility - why? I was scared in 2001 to sell VIGRX fund, and sell 401 K and IRA fund in 2009
- keep them from investing or force them out of the market - making a mistake
- wait and miss the rebound, miss out on a lot of gains
- Burt Malkiel - who is the economist?
Investors are prone to be either fearful or overconfident. History shows they buy and sell at almost exactly the wrong times: That’s why, over the past 30 years, equity fund investors have made less than 4 percent annually in the market, compared with an 11 percent return for the S&P 500, according to Boston-based research firm DALBAR.
If you adopt investing as a habit — small sums regularly over time — you’re more likely to be able to stick to it. “Maybe this is the corollary to the main point,” said Malkiel. “You’ve got to have the guts to continue this when things are bad. Anyone who lived through 2008 knows that isn’t so easy.”
In fact, according to the same DALBAR study, in October 2008, equity investors lost 24.21 percent compared to an S&P loss of 16.80 percent for a net underperformance of 7.41 percentage points.
“You do it regularly because if you stop when the market is down, you lose all the advantages of doing it,” Malkiel said.
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