Friday, October 10, 2008

Don't Bail!

I came across a fascinating bit of info on the NYTimes website this morning. With the gut wrenching drops in the financial markets of the past (what feels like an eternity) couple of weeks, there has been a concerted movement by many to pull out their investments and sit on cash as a sort of 'mattress money account'. Understandable, but not smart. As Ron Lieber of the Times points out:

"From 1963 to 2004, the index of American stocks tested gained 10.84 percent annually in a geometric average, which avoided overstating the true performance. For people who missed the 90 biggest-gaining days in that period, however, the annual return fell to just 3.2 percent. Less than 1 percent of the trading days accounted for 96 percent of the market gains."

So, at some point in the (we're all hoping not too distant) future, there is going to be a rebound, and portfolios, or what's left of them, will bounce. Until then, remember to save burlap sacks, which can serve as a shirt or pants in a pinch, and tin cans and string to use when that cell phone bill comes in the mail.

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