Don’t Run From the Bear

My friend, Allan Roth, wrote a great article about the bear market in the latest issue of Index Universe. I particularly like this quote from the article (emphasis mine):

At least I know that I don’t know what the market holds for us during the next six months. But, there are some things I know. First, I know that the market is a 17 percent better buy today than it was at its height during October 2007. A strong argument if ever I heard one that now is the time to start buying.

While this is a very logical argument, it falls on deaf ears when it comes to human behavior.

He then went on to illustrate his point with this interesting graphic showing equity mutual fund flows:

If there was ever proof that people do the opposite of what they should do, this is it. Instead of running from the bear [market], people should stare it down and call it’s bluff. Eventually things will turn around. Just rejoice at the marvelous big sale that’s going on right now in the market.