$29.5 Billion in One Week!
Earl Nightingale, famous personal development author and speaker from the 1950s whom I studied intensely right after I graduated from Holy Cross, made a statement that had enormous impact on me. To paraphrase, he said:
“Whenever you’re looking to achieve anything in life, take a look around you at the individuals who are getting the results you want. Model their behavior and you’ll get similar results.
More importantly, however, if you can’t find a good role model, pay careful attention to what the majority of individuals around you are doing, and then do the opposite because the majority is always wrong, especially about money and success.”
As I read and watched the news during the recent stock market correction, I couldn’t help but think about Earl’s statement, and how right he was.
On August 28th, right on the heels of the initial three day 10+% drop in the price of the S&P 500 Index, The Wall Street Journal’s Market Watch reported that a record $29.5 Billion was withdrawn from stock funds during that week, with $19 Billion coming out in ONE day!
This was the largest weekly fund withdrawal since they began tracking back in 2002. Keep in mind that includes the 2009-2009 market slide.
As you now know, market prices proceeded to rise 5 ½% during the next two days after the $29.5 Billion was withdrawn.
What a shame.
If you ever wanted a clear cut example of why the overwhelming majority of Americans never achieve financial independence, and never join the ranks of the top 6% of Americans who confidently continue their lifestyle without having to work anymore, there it is in black and white.
The fact that they all missed the 5 ½% uptick in prices over the following two days is just a small piece of the puzzle in the long term scheme of things. However, it’s indicative of what the real problem is.
The bigger issue, and thus the real problem, is how intellectually and psychologically unprepared the overwhelming majority of retirees are, thus the emotional, kneejerk reaction to instantly sell their holdings the moment prices temporarily fall.
What’s so sad is their complete lack of long term historical perspective, and their lack of careful planning. In today’s information age, you have to shake your head and wonder how that can be.
As I recently shared with you, a cursory glance at history illustrates how market price drops have always been a temporary blip on the screen in a long history of massive price and dividend appreciation.
And, any truthful student of history concludes how impossible it is to “time the market”, thus selling at all the highs, and then buying back in again at the lows. It sounds as if anyone should be able to do this. And, once in a blue moon, someone does, but they’re never able to pull it off consistently without getting burned.
As Earl Nightingale said, with no successful role model to observe what to do, take a look around at what the majority of folks are doing, and then go and do the opposite because the majority is always wrong!
When it comes to managing your Retirement Bucket™, which must provide your lifestyle sustaining income for the rest of your life, resist the temptation to participate in and be influenced in any way by the “group speak” going on amongst the majority.
Use this story of Americans withdrawing $29.5 Billion from their funds in one week as a perfect example of what NOT to do!