At some point in the future, we’re going to look back at the stock market during this financial crisis. If we take a broad enough view, we’ll see something like this:
If you move your long-term common stock investments into money market accounts (basically cash) now, you’ll probably be doing it at the worst time possible. You’ve already taken the losses. Those are in the past and you can’t go back and sell a month ago. But just because it sucks to lose all that value, isn’t justification for missing out on all the up-side.
Do you think the star should be left of where it is now? That is, do you think we’ll see more losses before a rebound? You may be right. I can’t predict where the bottom is and I doubt you can too. The people who are selling emotionally now aren’t doing so in order to re-buy at the bottom. No, they’ll wait until it’s way back up.
Do you think the slope to the right of the star is too steep? That is, do you think it will take longer to recover than this graph shows? You’re probably right. Yet, it’s still better to sell anywhere to the right of the star.
Be fearful when others are greedy. Be greedy when others are fearful.