A Quick Note for Scared Investors in September 2022

The market keeps declining, and Wall Street wants you to sell your stocks. 

They want you to give up. 

There’s even a word for it: Capitulation.

The “point in time when a large enough proportion of investors simultaneously give up hopes of recouping recent losses, typically as the decline in prices gathers speed.”

And you know what? There’s even a chart that investors are watching right now to determine when most of you have given up:

This is a chart showing results from the American Association of Institutional Investors’ asset allocation survey. 

Specifically: the chart shows the percentage that stocks occupy in investors’ portfolios. 

When the percentage dips? That means investors gave up. 

They sold their stocks and moved into bonds or cash or real estate or crypto or Beanie Babies or palladium ingots or whatever.

They “capitulated.”

Well, I want to paint two scenarios for you. Two little thought experiments. 

Let’s look at each moment investors “capitulated”...

And then let’s look and see what would have happened had you bought in right before and during each major moment of capitulation (that is, every spike and dip in the AAII Total Stock Allocation) over the last 32 years. 

You know what this table proves?

You make a ton of money if you’re patient and wait, regardless of what’s happening in the market. 

Here’s another thing it proves: Time in the market beats timing the market, and steadily contributing money to your investments every month let’s you take advantage of “buy and hold” as well as the return-boosting effect of big downturns.

Here’s yet another thing it proves: You make the most money if you’re buying at the moment when your fellow investors give up. Lose hope. Abandon stocks. 

There’s a reason why the rich love to quote, “Buy when there’s blood in the streets.” 

There’s a reason why they love to quote, “Be greedy when others are fearful.”

The wealthy reap what the poor abandon. And the rich get richer.

Is that good? I don’t think so. 

That’s why I’m literally writing to tell you not to sell your stocks – especially if you own big, safe assets that pay you steady dividend income. 

(Heck, it’s literally why I helped co-found a website called DIYwealth…)

Simply put, Wall Street and big-name investors and funds are betting on you panicking and capitulating. 

They know the data I just shared with you. 

They want you to give up and sell so they can move their fat wads of cash back into stocks. 

How do I know?

Because I want the market to go down more, too. 

Lower prices are a cure for bubbles. Lower prices are a cure for overvaluation. Lower prices mean less leverage and less speculation. 

Lower prices means your dividend income has a greater impact and helps you compound your wealth faster. Lower prices makes assets more attractive for investors with a long-term outlook.

So I’m buying. And I’m waiting to buy more. 

And I hope you are too.