Investors Spooked by the Market Tumble Should “Buy and Hold”

Highlighting the fact that future stock market movements are “unknowable” and that trying to predict them can be “dangerous,” a recent Wall Street Journal article quotes the legendary investor Peter Lynch: “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

The article says research data shows how individual investors lose over a “percentage point a year through timing errors,” and adds that, “for every person who thought the market’s relentless march higher was a danger sign, there are 10 who sold earlier in this nearly nine-year-long bull market.”

The “smart approach,” according to the article,” involves portfolio rebalancing. ” It argues that without it, “risky assets like stocks would grow to dominate any account over time.” That said, the article notes that a “rebalance and forget it” approach might not be the most prudent and that “this might be one of those times when it pays to take more chips off the table than usual.”