Ken Fisher, the founder of Fisher Investments, has cautioned investors about a prevalent mistake during market downturns, which he terms “Breakevenitis.” This warning comes amidst growing concerns about market volatility and potential bubbles.
What Happened: Fisher, whose firm manages over $332 billion, explained that this phenomenon involves investors selling stocks once they return to their original purchase price after a downturn, according to a report by The Street.
Fisher, known for his extensive experience navigating various market crises, emphasized that market corrections and bear markets are frequent occurrences.
He noted that investors often react emotionally, selling stocks during downturns due to fear of losses, which can negatively impact long-term portfolio performance.
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According to Fisher, historical data show that markets typically recover and continue to rise after downturns. He advised investors to resist the urge to sell at breakeven and instead focus on the potential gains that follow market recoveries.
Fisher’s insights are backed by economic theories on loss aversion, highlighting the importance of maintaining a long-term perspective in investing.
Why It Matters: Fisher’s warning comes at a time when concerns about a potential stock market bubble are growing louder.
In July, experts from major financial institutions like Goldman Sachs and Bank of America pointed to speculative activities and market concentration reminiscent of past financial manias. These red flags suggest that the market could be on the brink of a significant correction.
Understanding the risks associated with “Breakevenitis” is crucial for investors, especially in a climate where market bubbles are being widely discussed.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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