Don’t ‘Always Stay Invested’: You Could Miss A Major Opportunity
Lorimer Wilson
December 3, 2022
1,213 Views
Most investors have bought into Wall Street’s mantra of always staying invested. While this strategy may work for institutions during a bull market as we have had for the last 20 years, today it is not the best strategy for individual investors. [Here’s why.]
By* Lorimer Wilson, Managing Editor of munKNEE.com – Your KEY to Making Money. Here’s why.
While equity markets have made substantial gains, there have been four periods when stocks generated zero growth.
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Today, however, we are already in a market that has peaked and started to decline. When this market experiences a crash, most investors will lose at least half of their life saving and won’t live long enough to break even.
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The 1929 crash took 27 years to break even, whereas the 2000 tech crash took 15 years. The high-flying Japanese NIKKEI still hasn’t broken even from its crash in 1989.
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By every conventional measure, equity markets are significantly overpriced and are poised for a major decline.
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Apart from destroying the savings of most investors, following the ‘always stay invested’ mantra could result in missing the opportunity of a lifetime. By cashing out of all investments today, investors will preserve their savings and be poised to invest in highly discounted stocks, bonds and REITs at the completion of the correction…
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During broad equity market declines such as that in 2008, it didn’t matter what investments you were holding—they all declined. Even mining stocks declined by 21.6%, even though gold appreciated by 26%. The high-flying FANG stocks declined by 50%.
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- A totally contrarian strategy would be to cash out now and be liquid in order to benefit from opportunities that will present themselves after the correction.
- Staying invested in order to achieve minimal potential gains in the next few years does not justify risking losses of over 50%.
- Investors could hold cash during this period, but inflation will result in losses of purchasing power of +/-8% if the official rate is used, and 18% if the more realistic Shadowstats.com rate is used.
- However, if investors hold gold bullion, they will likely realize positive gains. The table below shows gains made during past corrections.
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As a result, not only will investors avoid losses, but they are likely to realize substantial gains by buying after the market crash and have more money to invest in highly discounted stocks…
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*The content of the above article is sourced from one by Nick Barisheff of bmg-group.com and has been edited ([ ]) and abridged (…) for the sake of clarity and brevity to provide the reader with a fast and easy read.
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