With the shaky economy in the recent years, many have been nervous when approaching the stock market. LearnVest shares the stories of three different investors with their reflections on their money moves.
When the stock market collapsed in 2008, many investors panicked and wondered: Should I ride this out or should I make changes?
The market’s spikes and dips can certainly throw people for a loop—especially if you’re new to investing. But if you ask a financial planner about the top strategy that a person could have taken during the recession, here’s the answer you’re likely to hear: People who held on—staying the course—typically fared the best.
“Over long periods of time, markets compensate investors,” says John Tabb, a Certified Financial Planner™ at Questis, which manages market-based, globally-diversified portfolios. “When you try to jump in and out of the market, you have to be right twice—which is hard to do. If you miss one of the two or three best days of the year, you may miss a large portion of that year’s gain.”
Dana M. D’Auria, a certified financial analyst and director of research at investment advisory firm Symmetry Partners, agrees: “Most people aren’t going to outsmart the market. The goal is to buy low and sell high, but investors are notoriously bad at timing and tend to do the opposite.”
What about simply looking at the history of a stock and trying to guess? The unanimous reply from experts: If you’re not a finance pro, that tactic can be a big gamble. It may sound clichéd, but “past performance is not indicative of future results,” says Laurie Nardone, a Certified Financial Planner™ at investment advisory firm Shira Ridge Wealth Management.
Of course, there are always going to be some people who are investment intrepid—like these three men and women, who’ve all been investing for at least 10 years. So we asked them to share their thoughts on what they’ve done well and what they could have done better before, during and after the recent economic crisis.
The All-in-the-Family Investor
Stef Safran, 41, founder of stefandthecity.com, Illinois
“When it comes to my investment strategy, I take cues from older family members. My grandfather never graduated high school, but he became a millionaire through investing. My dad also did well by investing and my mother was in a stock club. There was always talk about stocks around the dinner table, and I listened carefully to what everyone had to say, since I saw how successful they were.
Starting in the early 1990s, my grandparents gave me gift money over the years and told me that I could invest it in anything that I wanted. So I went to a brokerage company, and gradually invested in a total of five to 10 stocks. I chose big-name companies, mainly strong tech firms like Apple, Microsoft and Hewlett-Packard. My grandfather also encouraged me to invest in Con Edison. He’d say, ‘Utilities are going to be around forever.’
Over the past two decades, even through the recession, I hung onto the majority of those stocks. Now and then, if I saw my dad buy or sell something, I would follow in his footsteps. But, for the most part, I’ve used a ‘buy and hold’ philosophy. The stock market is like Vegas: I’m bound to win on some and lose on others, but slow and steady wins the race. Overall, my investments have doubled, despite the recession.”