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yes, yes, decades of research by nerds in their labs, who don't trade and live on public welfare has shown that conclusively. in the meantime, here is what the real world is like: * people falsely believe that due to having learned about the myth of the buy&hold investor, they are now 100% in control of their psychology and will not succumb to 'this time is different' panic selling when things get serious. their own psychology will be the biggest surprise to young investors, who have entered the market after 2008 and haven't experienced even a single correction. * people aren't properly accounting for being forced to sell at a loss due to unexpected expenses, which are dramatically more likely to occur during a downturn, i.e. the probability of losing their job during a recession is >> than any other time. same thing with divorces, probably. maybe even illness. distant relatives asking for money. etc etc * people aren't entirely wrong to panic sell when mass hysteria breaks out. most of the research is based on the US stock market, which is exceptionally long-lived and uninterrupted. if you asked tsarist bureaucrats retiring in France how well their portfolios are doing, they would sing you a different song. * [personal] if I had to put a monetary value on the psychological relief I feel since reducing my exposure to equities by half, it is very well worth whatever grandiose compounding fortune I am forgoing because of it, not to mention that should I be lucky with the timing, that may not even be the case. as a rule of thumb: when you repeatedly find yourself checking financial news, you are invested too much (and are now longer a 'passive investor') the only good thing to be said about the 'buy & hold' meme is that it drives people away from the even worse active management industry, but that doesn't make it unconditionally good advice. |