TLDR; “Why don’t we just sell everything and wait this out? Get back in when the dust settles?” This is the question every financial advisor is getting this week, from at least one or two clients. They’re asking out of genuine curiosity, not just panic or fear. And it’s a great question. The great answer is that you won’t know when the dust settles. There’s no airplane writing the “all clear” in the sky above your neighborhood. And when the dust settles, do you think stocks will be at their lows? Or will they have already rallied furiously, in anticipation of this? Let me give you an example. Today is March 9th. Precisely eleven years ago today, in 2009, the stock market stopped going down. There was no reason. The dust had settled, without fanfare or any sort of official announcement. If you had polled people that day, or week or even month, most would not have agreed that we had seen the worst. The economic headlines were not improving. But there it was. And by June 1st, less than 3 months later, the stock market had climbed 41% from that March low. And even with that having happened, the majority of participants still weren’t clear that the dust had fully settled. That we had, in fact, seen the worst. There were still people calling us 3, 5 and 7 years later who had gone to cash and still hadn’t gotten back into stocks. They missed a new record-high a few years later and hundreds of percentage points in compounding on their assets.
2. Ben Carlson – Returns from the bottom of bear markets
TLDR; "Here are the other 12 bear markets that are worse than the current version along with their ensuing one, three, and five year forward returns:
Average 1-year return from the bottom: 52.2%
Average 3-year return from the bottom: 88.6%
Average 5 year return from the bottom: 132.2%"
3. Ben Carlson – What if you buy stocks too early during a market crash?
TLDR; "If you would have bought stocks the day the S&P 500 bottomed following the Great Financial Crisis on March 9, 2009, you would now be up 345% or so, even after living through the current 30% plunge. The problem with this analysis is it assumes you bought at the exact bottom. The only people who nail the bottom are liars and lottery winners. Being early or late has still led to some great returns over time. Don’t become addicted to your dry powder (cash). Cash on the sidelines does no good if it stays on the sidelines. I would rather be kicking myself in the short-run for jumping in too early than kicking myself in the long-run for never putting my money to work in the first place."
4. Doug Oosterhart - Buying the dip? Here is how to do it without emotions
This is a piece that I just wrote. The key takeaway is that investors can enter orders today that will systematically invest their money at different "sale prices" for their specific investment. This is key when trying to find the "right time" to buy the dip.
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