Read on Twitter
I was struck by a tweet from @michaelbatnick who reports that 31% of Fidelity clients aged 65-69 liquidated 100% of their accounts between Feb. 20 and May 15. No details as to how many sold exactly when but I think its fair to assume an average hit of 20% from 2/20 and some worse
The big problem with market timing is that most will sell at the wrong time and then have no clue as to when to get back in to the market. We know that there is currently a record amount in money market funds (paying zero) which presumably includes a lot of the Fidelity refugees
Active investment managers, of which I am one, get criticized for our fees, which are obviously higher than exchange traded funds. We probably cost our clients an extra 1% per year or so, depending on asset mix and size of account. But look at what the Fidelity sellers lost
If we assume, as is reasonable, that most/many missed the most dynamic 7 week rally in S&P history they are probably down 15% to 25% from where they would have been had an active manager told them to do nothing. And this is the part that critics don't get about active management
It is not just or even mostly about stock picking. It is about dealing with emotions, and in particular, about preventing clients from making this kind of mistake. In previous posts I talked about a client whose money compounded over 16 yrs and grew to four times its initial size
A few replies noted that this was not much different than the return on the S&P with dividends reinvested. Maybe. But try and find an individual investor who stuck with an S&P index fund for 16 years through the Great Financial Crisis and the 2020 panic and never sold.
I am sure there are some but the horrible stats noted at the top of this thread (31% selling at the bottom!) indicates that they are likely a small minority. Emotion is the great enemy of successful long term investing and a dispassionate advisor is the most effective defense.
