In 2019, during a conversation, an experienced investor told me that he went out of the market in the summer. At first, I did not pay attention, as I was following a passive investment strategy.
I usually don’t read market information, but there I was on holiday, screening my phone, and Google News suggested an article announcing a crash in the summer.
My inner voice started to bother me, and I sold two winning positions to secure my summer. Was it the right decision?
At that time, my portfolio was composed of :
- ETF defensive portfolio inspired by the “all-weather portfolio” of Ray Dalio managed by TrueWealth, a low-cost robot advisor. I have since switched to a different and cheaper broker’s solution. I currently work with Interactive Brokers.
- Two ETFs that I was managing myself through a direct broker Swiss quote in this case.
- ComStage MSCI World UCITS ETF: The MSCI World index tracks stocks from 23 developed countries worldwide.
- ComStage Nasdaq 100 UCITS ETF: The Nasdaq 100® index tracks a selection of 100 stocks chosen from among non-financial stocks listed on the NASDAQ stock exchange.
In the summer of 2019, I sold most of the MSCI World and the Nasdaq 100 position. My reasoning at that time ( or my inner voice) was, “let’s secure the win, enjoy the summer, and revisit the situation in September.”
What happened in this famous August 2019?
In August, the market declined a bit. My two ETFs lost around 2%, which was not the crash announced by the article.
However, then I could barely enter the market because it was growing for the next five months.
COVID-19 arrived. The market crashed, and it was a great opportunity to enter it in a major way. I repurchased my previous two indices and switched my entire defensive ‘all-weather portfolio’ ultimately to a more aggressive ETF stock repartition.
Was it the right decision?
In retrospect, yes, but I had no way of being certain at that time.
Who could have planned the corona crash? No one.
Who could have planned what’s going to happen next week in the markets? No one.
Everyone makes his prediction, but no one can ensure its accuracy.
At that time, I was still trying to time the market, and I was just lucky.
Let’s have a look at August 2020.
I own mostly Vanguard FTSE All-World UCITS ETF Distributing, and I still had a smaller part in my two Comstage ETFs. In August of this year, the market was bullish, with an average of 7% for these three ETFs.
Could I have predicted it? No.
My same friend and many financial advisors were suggesting to go out of the market because of the high volatility risk during the summer.
This summer, I earned virtually (as I do not sell) more money from my ETFs than my salary.
So was it the right decision?
In retrospect, yes, but could I have predicted it? No.
I was just lucky again.
My learning
Going out of the market, and waiting for the right time to enter it’s tiring and inefficient. I’ve stopped doing it.
I invest a fixed amount monthly whatever happens. I do not sell my ETFs anymore. I keep an adequate level of cash, I consider it as my bond repartition.
If the market is going down in a correction or crash, I increase my investment in response.
There will be corrections, there will be crashes.
I’m preparing myself psychologically to stay calm and take advantage of them. No one knows how he will react during a crash. It’s a very personal situation.
My first crash test (COVID-19), where I was heavily invested in the market, was not easy but positive. I transformed my large part of bonds, commodities, and cash into a more aggressive ETF stock repartition,
(I own mostly the Vanguard FTSE All-World UCITS ETF Distributing. See here why)
I’m a big fan of the 7 Habits of Highly Effective People. (“The 7 Habits of Highly Effective People”. How it has transformed my life, and why it can change yours).
The first habit is “be proactive”, referring to the habit of personal responsibility.
I can’t control the market. I can’t predict the next bull or crash situation. However, I can control my savings.
I can invest every month, whatever happens, and I can prepare myself mentally to react positively to the next crash.
With those principles, I feel that I’m in full control of my financial independence.
Everyone can become financially independent.
How prepared are you?
Disclaimer: I’m not a financial advisor. All information posted is merely for informational purposes. It is not intended as a substitute for professional advice. Should you decide to act upon any information on this website, you do so at your own risk.
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