Panic Selling Costs You

Sam Ro points out a study done by Bank of America Merrill Lynch’s Savita Subramanian:

“We compare a buy-and-hold strategy vs. a panic selling strategy from 1960-present,” she said in a recent note to clients. “We assume an investor sells after a 2% down-day and buys back 20 trading days later, provided the market is flat or up at the end of that period.”

Can you guess what happened?

“This strategy underperforms the market on a cumulative basis since 1960 both overall and during every decade, given the best days typically follow the worst days.”

This confirms what we’ve believed for a long time. It’s best for investors to ride out storms. In fact, the worst of it has usually passed by the time you even realize you’re in a storm.

Posted by on August 4th, 2015 at 1:30 pm


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