Mar 30, 2021
The theme this week on the One Minute Retirement Tip is “I Sold All My Stocks In 2020...Now What?!”.
Today, I’m talking about the worst part of selling all your stocks. This is something that few people realize, but if you can sear this investing truth into your brain, it will help to convince you never to sell, even when it seems the world is coming to an end.
Using data compiled from JP Morgan Asset Management, during the 20-year time period from 2000 through 2019, the S&P 500 averaged a 6% annual return. If you missed just the 10 best days, your returns over those 20 years dropped to 2.44% annually. Astonishing! 10 amazing days in the stock market over a 20-year time period were responsible for more than half of the cumulative returns over those 20 years.
If you missed the best 30 days, your returns were actually -1.95% over that same 20-year time period.
What’s the takeaway? You must be invested at all times to benefit from the stock market’s growth. If you bail out of the market when times are tough, you’re likely to miss at least some of those best days. They usually occur in the midst of a downturn in stocks, not when times are calm. If you watched the stock market closely in 2008-2009 or in 2020, you know exactly what I mean.
A 500, 800, or 1200 point drop in the Dow was often followed by a massive gain shortly thereafter. On March 24, 2020, the Dow has it’s best 1-day gain since 1933, surging more than 11% in just one trading day.
Little did anyone know, but the stock market hit its Covid bottom just a few days prior to that. If you panicked and sold when the stock market was in freefall just days prior, you missed the best day in the stock market in a lifetime.
And that’s the worst part of selling all of your stocks. It most often means you’ve both locked in your losses, but you miss out on those good days in the stock market when it matters most.
That’s it for today. Thanks for listening. My name is Ashley Micciche and this is the One Minute Retirement Tip.
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