(By Disciplined Approach to Investing) It is understandable that investors have developed fatigue when it comes to investing in stocks. As the below chart shows, since 2000, investors have essentially made no money in stocks. Compounding this is the fact that the return necessary to recover from the equity market declines is more than double the losses that have been incurred.
One outcome of the equity market volatility is investors have continued to allocate more of their investment dollars to fixed income/bond investments. Given the low level of interest rates though, a spike higher in rates can have a detrimental impact on ones bond portfolio. Many investors experienced this outcome in the first quarter this year.
, we believe investors can still make money in stocks; however, a buy and hold strategy will not provide the best return outcome in this environment. Being more tactical and taking a little money off the table (taking some gains) when stocks run up is a necessity during these times.