When you had the chance to sell into strength before adversity and locked in gains, you didn't do it, because there's more gains to be made
When early signs of adversity arrived, you had the chance to exit and locked in gains, you didn't do it, because you didn't want to pre-empt it, could just be noise and markets do climb a wall of worry
When adversity finally shows up, you had the chance to exit and still able to lock in some gains or perhaps escape with a small loss, you didn't do it because you didn't want to be reactive and you are an investor so wants to avoid a knee jerk reaction
When adversity starts to hit home with pain, you had the chance to exit with much reduced gains or some losses, you didn't do it because you fell back on hope for longer term recovery refusing to take/book losses
When adversity delivers considerable pain, you no longer want to exit because 'it is too late' so you didn't do it
Bottom line: You only knew how to Buy, you never knew how or when to Sell or probably never.
So now read this excerpt from an AFR article
John Pearce, the chief investment officer of $149 billion superannuation giant UniSuper, admits he’s battered and bruised. But history tells him this isn’t the time investors should go into their shells.
“It’s the times you’re feeling most pessimistic that usually turn out to be the best time to buy,” he tells Chanticleer on Friday afternoon.
“But I tell you what – I’m feeling bloody pessimistic.”.
So is it time to start buying? While Pearce says it’s too late to sell – “you’ve already missed the boat” – he’s not quite ready to look for bargains yet.
So what John is saying is this could be the worse time to sell or best time to buy when you feel pessimistic. But he not selling into the decline because 'it is too late' nor is he buying because it is not a bargain and he is pessimistic about future outlook.
This is classic fund manager who fears and wants to avoid mass fund redemptions - while it could be true that it is somewhat a bit late, except he won't tell you the odds of market making a further 20-30% down if we get a recession and staying low for a long period of time (as it happened in 2008). And he is not trying to make a pre-emptive move even if he believes the odds of a recession is high, because there is a chance he could get it wrong. So he will act when he sees it but when he sees it and the market has already priced the recession, he will say it is too late. It epitomises the inaction as I expressed above.
These fundies generally buy and invest and seldom sell. They sell only when they get disenchanted in how their holdings are managing their businesses. Or if the stock gets ridiculously too expensive for its prospect. Otherwise by and large it is a hold, and yes they probably have some SGR in the mix.
In a large pool of funds, it is easy to hide the lemons. Passive funds track the indices so they stay invested. Active funds get proactively managed and they could outperform or underperform the indices but you pay higher management fees.
But are they managing it like it is their own money? Or managing to avoid making mistakes?
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Unfortunately, it’s hard for any big super fund to trade tactical views like that, Pearce says. But they can prepare.
“It’s a case of not firing your bullets, building up a bit of liquidity and then waiting for the time to start to allocate that liquidity,” he says.
