|Pathways Advisory Group, Inc.|
Jeff Karst, CFP®
We all like to buy things “on sale”. There’s a psychology to it. Recently my wife bought a blender but I was pleased that she was able to find one for 30% off. Although I was still a little upset that she broke our old one. It’s the relative price change that causes us to think something is a “good deal”.
After the housing market “crashed”, how many times did you think about buying a rental property? Of course it’s a good time to buy – homes are “on sale”. You can enjoy a bit of income and the renter is paying the mortgage. And, you knew that prices would likely go up from that point.
Now consider the stock market. Did you think that March 9, 2009 was the perfect time to buy stocks? I’m guessing not. During 2008 and the beginning of 2009, nobody wanted to buy stocks even though they were “on sale”.
Unfortunately, this is common for investors. There is much research to show that equity mutual funds have the most money flowing into them when the market is going up (and near its peak). And conversely, as the market hits bottom, money is flowing out of equities. That is not the way to invest!
Our approach is to stay invested and rebalance. A disciplined investment strategy has proven time and again to yield superior investment returns. When the market dips, you should be thinking “How can I buy more stocks? They’re on sale right now!”
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