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If You Didn’t Sell Stocks This Month, You’ve Probably Got FOMO

Posted by hkarner - 1. März 2018

Date: 28-02-2018
Source: The Wall Street Journal

After getting burned during the financial crisis, everyday investors say they gave up on trying to time the market

The market’s February gyrations were a shock, coming after a prolonged period of calm and steadily rising share prices.

Individual stock investors jolted by February’s market tumult said fear of missing out on the next leg of the bull market still outweighs fear of a big correction.

The market’s February gyrations were a shock, coming after a prolonged period of calm and steadily rising share prices. Early in the month, the S&P 500 and Dow Jones Industrial Average both fell into correction territory—marked by a 10% decline from their most recent highs—while the latter experienced its biggest-ever intraday point swing.

Yet many individual investors said they had been humbled trying to time big market moves in the past and so didn’t try to do so this time. Their calm may have helped share prices rebound. As of Tuesday, the S&P and Dow were up 6.3% and 6.5%, respectively, from their Feb. 8 lows and are now down just 4.5% each from their Jan. 26 highs. Both indexes are also up year to date, after briefly pulling into negative territory early on.
Justin Beghly of Fayetteville, Ark., was one investor who decided against selling. He said he used the recent market dip to buy more Facebook Inc. shares.

Mr. Beghly’s decision sprang from a move out of stock holdings in early 2017 based on the idea Donald Trump’s presidency would spook stocks. Instead, markets raced higher. He has since returned to stocks.

“It’s a terrible thing to try to time the market,” said Mr. Beghly, 40, who is studying for a master’s degree in education.

Investors did pull a record amount of money out of mutual funds and exchange-traded funds that track stocks at the beginning of February. But they withdrew less the following two weeks, according to EPFR Global, a fund-tracking firm. That suggested an initial rush out of stocks quickly subsided.

Although institutional investors dominate stock trading, how individual investors react to market moves is important for overall market sentiment as well as the flow of funds into and out of different asset classes held in mutual funds, retirement accounts and employer-sponsored programs.

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