I recently listened to a radio investment advisor show. A young woman called seeking advice. In 2007 she inherited $30,000 and was encouraged to invest it (in a Vanguard Index mutual fund she said). But by 2009 her investment was worth not $30,000 or more, but $10,000 so she withdrew the funds from the Mutual fund. As she described it, she was in a very risky investment.
At age 32 she was seeking a safe investment.
The advisor asked if she was still glad she withdrew the $10,000. Yes, she said. He then asked her if she would do that again. Yes, she said.
Finally the advisor asked her if she knew what her investment would be worth if she hadn’t withdrawn that $10,000 guaranteeing a $20,000 loss. I’m afraid you are going to tell me, she replied.
In fact, she was not in a very risky investment, except from her perspective. What happened to this woman is what happened to many Americans who claim they lost their retirement savings in the recession. They didn’t understand their investments or the stock market and they panicked.
Look at the charts (Bloomberg.com) below. The woman’s investment would have recovered fully by April 2013 and would have gained about 30% more by April 2016 and today she is only age 32.