Investment Nightmare

Earlier this week I read an article in the Wall Street Journal about how some investors are reacting to the severe drop in the stock markets. Many investor are abandoning the buy-and-hold strategy for the do-it-yourself approach. I think this is very drastic and will led to nightmarish results.

Only a few money manager have been able to beat the market for an extended period of time so why does one think as an amateur investor that they can be one of these market beaters. I can understand their discouragement and high level of distrust in their investment advisor but to go it alone and become stock timers and pickers is going down the wrong path.

Even if they were somewhat successful the advantage would be lost through excessive trading fees and taxes incurred. People want more control over their money and are going it alone but I can only see disaster down the road. If they think the 50% loss in their portfolio is bad now just wait after they have make some untimely moves.

If you want the excitement of being a day trader so be it but only use 5% of your overall investment portfolio. Leave the remainder of your investment in index funds be it through mutual funds or EFTs.

In the Wall Street article mentioned above John Bogle (founder of Vanguard Group) states: "It's a fools' game. Not only will short-term investors pay more commissions, fees and other costs, but various studies have shown that market timers typically lose more money than buy-and-hold investors. If you want to trade the market, you've got be right twice - you've got to get out and get back in". Who can do this consistently?

I suggest one seek out assistance or just play the market through a diversified index strategy and the stay the course since leaving now when the markets are so beaten down will make paper losses permament.