John’s a man of few words. But he’s got a wealth of experience.
With slicked-back gray hair and tan, wrinkled skin, his grip transcends age.
But this time he pulled his hand back when I came to greet him.
“Sorry, Anthony. I’m high-risk. Diabetes and high blood pressure,” he said as he gestured me onto the boat.
John captains the boat on our frequent dive trips. He’s stoic.
In the years that I’ve known him, I’ve never seen him worried. Hell, I’ve barely seen him surrender a chuckle.
But this past weekend, I met a very different John.
I was about to slip into the water when he confessed: “I pulled my money out this time … every drop was $200,000 gone. Just like that.”
I knew it was a mistake. But he’s not alone.
Millions of Americans share his concerns.
Their health and life savings are at risk.
We’re staring down huge uncertainty. That’s why I’m using history as a guide for this crisis. And here’s what it’s telling us to do…
The Family-Friends Mistake
Folks like John are cashing in their stocks. After a lifetime of work, they are scared to see any more of it evaporate when the Dow Jones Industrial Average suddenly drops 2,000 points.
Bloomberg reported that people pulled $8.1 billion from a popular exchange-traded fund (ETF). That’s the most dramatic loss since the 20% market correction in December 2018.
Below is a chart showing the money flowing in and out of the iShares Core S&P 500 ETF (NYSE: IVV):
But don’t fall into this trap. Wall Street waits for Main Street to sell. It marks an important stage of a bear market: capitulation.
Capitulation is when people give up. I call this the surrender stage. Investors who vowed to hold through the bear market give into the pressure.
After all, everyone else is selling. Why shouldn’t I?
But investors who have shown grit and stayed in are about to be rewarded.
Don’t Surrender to Fear
Like it or not, bear markets are a part of investing. The last century gave us a bear market every six years on average. And the markets took a 40% hit on average, according to Fidelity.
But all that risk is rewarded. Markets hit new highs within two years.
Investors who surrender at the bottom miss out on the recovery. That’s because it can take them years to feel comfortable investing again. By then, the market has already recovered — and then some.
America is a resilient nation. We’ve overcome worse than the coronavirus.
Consider investing in the iShares Core S&P 500 ETF (NYSE: IVV). It carries a basket of top American companies such as Microsoft, Berkshire Hathaway and Johnson & Johnson.
The same fund our nervous peers are dumping is the same one I’m most bullish on. It’s a great way to bank on American enterprises and ingenuity.
Managing Editorial Analyst, Banyan Hill Publishing
P.S. Check out my latest Marijuana Market Update. Curaleaf and Charlotte’s Web both put out big news this past week. Tune in to find out what my take is on these two companies. You can watch it all right here!