Monday, October 27, 2014

Buying High and Selling Low

Millions of Americans inadvertently made a classic investment mistake that contributed to today’s widening economic inequality: They bought high and sold low.

Late in the stock-market booms of the 1990s and 2000s, more U.S. families clambered into stocks as indexes surged. Then, once markets tumbled, many households sold and took losses.

Those that held on during the most recent collapses reaped the benefits as stocks nearly tripled between 2009 and today.

The split path is one driver of stark inequality in the U.S. Many workers have seen their wealth and incomes drop despite more than five years of economic expansion in the U.S. Some fear the gap, widening for decades, could fracture society and slow the nation’s potential for economic growth in the long run.

-from "Bad Stock-Market Timing Fueled Wealth Disparity" in today's WSJ.

It was during 2008 and 2009 that I gave up trying to figure out when to buy and when to sell stocks and turned the portfolio over to Investor Solutions, just before the market plummeted.  When the market tanked, Investor Solutions liquidated fixed income securities in our portfolio, took the cash, and bought stocks as bargain prices.  Not that I am now among the rich, but many people were selling stocks at that time, as the article indicates.

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