Smart Capital looks for the Highest Return at the Lowest Risk
During the financial crisis of 2007, a lot of stock market value just vanished as investors panic sold. It should be understood that mature investors who remained calm and patient experienced even larger gains in the years after the financial crisis. Some stocks, of course, didn’t recover but most did and surpassed the previous highs.
Many investors dumped stocks and moved to cash. This move also comes with twofold risk as you would have to be right on your risk analysis twice in a row for it to pay off. As an example, you would have to time your move out of stocks and into cash just right to maximize gains and minimize losses. But you would also have to time the move out of cash and back into stocks just as accurately. Most investors would have been better off holding through 2008 and 2009 to ride the wave back up to higher gains.