There was a lot of attention given to the first 28 days of 2016. During that period, the S&P 500 fell 10.5%, which was the worst start to a year ever.
Since that time, the S&P 500 is up 35%, the Dow is up 41%, the NASDAQ 100 is up 49%, and the Russell 2000 is up 35%. If you sold in February and haven’t gotten back in, now what?
Investors need to stop thinking in terms of black or white, all in or all out. If you took 20% of your portfolio to cash, okay, no big deal. You played defense when that looked like the prudent thing to do. But if you took your entire portfolio to cash, you’re shot. It’s impossible to move forward objectively.
One of the greatest benefits to having a process is that it minimizes regret, which is one of the hardest emotions for investors to scrub off. It only takes one really big mistake, in this case selling in February 2016, to leave a permanent stain on your psyche. Where the market goes is out of our control, but if you make these sort of radical moves and luck is not on your side, you have nobody to blame but yourself.