Mattress Investing Revisited

“I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading 'Now is the time to buy.'”   Peter Lynch

The stock market fall of 2008 sent many into a tailspin: moving money, selling equities, taking losses.  Some naysayers and soothsayers predicted that the Dow Jones Industrial Average would not reach 10,000 again for years!  The impending doom sent equity holders out of the market  like bats out of that fiery inferno below, and into the safety of bonds, gold, cash and under the Simmons Beautyrest.  Months later, as the market looked more appealing, buyers put their toes in the water again.  What did this investing style accomplish?

Not much, according t

o my analysis of 2009 and 2010.  (See “Mattress Investing Revisited.” ) In general, those who did the mundane thing of staying put and contributing regularly to an equity fund fared better than those who withdrew from equities or waited several months to venture back into them when somebody said it was “time.”

There is no doubt that anybody holding stocks or equity funds should know when to sell; but selling at rock bottom prices is never a good idea unless a company's balance sheet shows that it is no longer a good investment.  Selling because “somebody on the radio said so” or buying because somebody on TV said, “now is the time” usually means it is too late.  Peter Lynch was right, and, by the way, he retired early.

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