So far, 2016 has been a great example of why timing the stock market is so difficult! The year started off as one of the worst in history and everywhere you turned there was some Wall Street pundit predicting nightmare scenarios. Dropping oil prices and China’s march toward a recession were the two main drivers of investor’s panic. If you didn’t sell any stocks during that period the chances are that you at least thought about doing it.
February 11 turned out to be the bottom and from that point on the stock market has seen a pretty steady upward ride as the chart below shows.
Looking Back Is Easy. Actually Doing Something When It Is Happening Is Hard
Its easy to look at that chart and say that I should have bought more stock in February. Any time in February turned out to be a good time to buy. But who knew the market would turn around like it did? I sure didn’t.
If you bought stocks in January you were shocked to see the market continue downward almost unabated. There were some truly scary days in there when the markets dropped big. Its hard jumping in with real, hard earned money when the carnage is going on all around you and there seems like no end in sight.
And when the markets started to tick back up in mid February, who knew they would keep going up like they have? I didn’t. As it was happening I was thinking that “surely stocks might reverse course and head back down again”.
Its puzzling to me how can things could have been so bad and prompted so much selling only to reverse itself almost on a dime. I can’t predict what will happen in the future and the chances are that neither can you. THAT is why timing the market and actually acting on things as they happen is so tough. THAT is why I am a long term investor.
Did You Sell And If So, Did You Buy Back At The Right Time?
Many investors panicked at the start of 2016 and that is one reason why the markets were in free fall. But how many of those investors sold before the very bottom and then had the guts to buy back in somewhere near the bottom? I would guess not too many.
If you are going to sell in a down market, unless you want totally out of stocks for good, you have to get back in lower than you sold for it to be profitable. That is hard to do. VERY HARD!
I must add that this story isn’t over. 2016 is only three months old and a lot of things can happen the rest of the year. In fact, things could head back down tomorrow and the markets could end up lower than their February 11th lows. There are some experts that are prediction just that. However, as of right now at the end of March, it sure looks like I missed a good buying opportunity. But I mustn’t be too down on myself and just glad that I never sold a stock in panic and my portfolio is now up for the first time this year.