WSJ – Once Bitten, Twice Bold: Look Who’s Buying Stocks Now

Jason Zweig

Jason Zweig is one of my favorite writers at the Wall Street Journal. Last weekend, he wrote an interesting article regarding some of the classic sell low, buy high behaviors taking place due to the sustained gains of the market rally that is now nearing 24 months in length. It’s a must-read for anyone wanting to learn what NOT to do with their portfolio. Here are a few snippets from the article:

  • …many of the investors who are aggressively getting back into stocks are the very same people who fled the equity markets in the fourth quarter of 2008 and the first quarter of 2009, just before it embarked on a historic rally.
  • These are the sheepish bulls—people who know they sold low two years ago and worry that they are buying high today. In some cases, financial planners say, these clients are asking to hold even more in stocks than they did before the market crashed.
Over the past few months, the Wittes have moved back into stocks. “I’m back to about 40% equities,” Mr. Witte says, “and I want to be at more.”
Does he worry that, having bailed out near the bottom, he may be getting back in near a top? “That’s certainly a good question. I suppose some might call us foolhardy,” Mr. Witte says. He adds, “We don’t have any regrets. I think the market is there to protect what you have when you’re a retiree.

Over the past few months, the Wittes have moved back into stocks. “I’m back to about 40% equities,” Mr. Witte says, “and I want to be at more.”

Does he worry that, having bailed out near the bottom, he may be getting back in near a top? “That’s certainly a good question. I suppose some might call us foolhardy,” Mr. Witte says. He adds, “We don’t have any regrets. I think the market is there to protect what you have when you’re a retiree.

For the record, Mr. Witte is a 73 year old retiree…and the market is not protective of anything but change.

The point is that some investors are demonstrating the classic (and highly detrimental) behavior of trying to time the market. These individuals fled to cash near the bottom, and are just now getting back in…after a historic 24 month rally. Are they buying high after selling low? Time will tell.

Read Jason’s Article at WSJ.com