Study after study that I read about individual stock market investor behavior arrives at the same conclusion. Individual investors have historically poor sense of stock market timing.
Four years ago, the U.S. stock markets were at the lowest levels than in the previous ten years. No one wanted to own stocks then because of how much money they lost during the last great stock market decline from July 2008 to March 2009.
In March of 2009, the stock market was on sale. It was equivalent to everything at your favorite store on sale for 50% off. Would you have taken time out of your busy schedule to save 50% on every item that you could carry out of that store?
Today, everyone wants to own U.S. stocks. Now that the stock market has gone straight up to new all–time highs, U.S. stocks are popular again.
Every time the U.S. stock markets hit new high levels, individual investors rush back into the stock market with the fear that they might miss out on all the “free money.”
Does anyone remember the same kind of investor behavior several years ago regarding real estate prices? I do. I am living in my real estate bubble investment mistake. And I pay for it every single month.
Job data remains weak. A U.S. Government budget showdown starts today. A possible government shutdown looms.
To me, all this adds up to a stock market that is acting a great deal like the real estate disaster that took place over the last few years.
Ric Lager
Lager & Company, Inc.
