Personal Wealth Management / Expert Commentary

Ken Fisher Debunks: “Don’t Buy In Until There is Clarity That You’re in a Bull Market”

Fisher Investments’ founder, Executive Chairman and Co-Chief Investment Officer Ken Fisher debunks the myth that investors should wait to invest in stocks until it’s clear a market recovery is underway. After a prolonged stock market decline, many investors believe they should look for an “all clear” signal before entering back into stocks. However, Ken notes that waiting too long virtually guarantees you’ll miss the initial—often swift—rebound typically associated with the start of bull markets. Particularly if you’ve sold stocks during a downturn, waiting to buy back in until after a new market recovery has clearly begun means you’ll lock in losses over that period, which can set you behind in reaching your long-term financial goals.

According to Ken, at the beginning of a new bull market, many investors fall victim to the “pessimism of disbelief”—where any good news is met with pessimism and second-guessing, which can scare investors from getting back into the market. In reality, getting back into the market before a recovery could yield significant upside for disciplined investors.

Transcript

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A man appears on the screen wearing a navy suit, sitting on a chair, behind him is a white screen with the title “Debunkery” 

He begins to speak.

Audio

Ken Fisher: Clear signals don't come.

If you're waiting for a clear signal, you're not going to get that for a long, long, long time.

Let me just take you back.

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On the white screen a title appears “DEBUNKERY” with subtitle “Seeing Through Wall Street’s Money-Killing Myths”

Ken Fisher appears back again in the same position.

Audio

Ken Fisher: So, every month I cover a different myth from my book Debunkery, showing why some piece of

conventional, the logical type wisdom is wrong.

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On the white screen behind ken fisher, a sentence is written in red “Don’t buy in until there is clarity that you’re in a bull market”

Audio

Ken Fisher: And one is don't buy in until there's clarity that you're in a bull market.

This is wrong for so many reasons.

And in my book, Debunkery in

chapter nine, I cover them.

I'm going to cover them briefly

right here and right now.

The biggest single reason is there's never clarity.

Clarity in the stock market is

always very expensive to buy.

When you think everything's clear,

it actually means it's risky.

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On the white screen behind Ken Fisher a V shaped red line is drawn, under it another W shaped line is drawn indicating a chart movement

Audio

Ken Fisher: The normal way bear markets end and turn into a bull market is in either a V shape pattern steep decline followed by a steep ascent, or in a W shaped pattern with two bottoms.

But when you actually come off the bottom, the initial first few weeks of the new bull market ascend at

about the same rate as the last few weeks of the descent and percentage wise are huge.

And getting out and then waiting for

that clear period virtually guarantees, if not guarantees, that you miss that up leg.

So, you've locked in the loss that made you most afraid and caused you to get out in the first place.

Locking in the loss before that ascent is just about the worst thing you can possibly do to yourself.

Secondarily, and I've written about this at some length, there is this thing that I call a pessimism

of disbelief, which I also wrote about in Debunkery, my book on myths, that as that bull market begins, people become more pessimistic, not more optimistic.

It's not what people expect.

Therefore, as the market goes up, there's more and more evidence thrown at you that you should be

afraid and that there isn't clarity, that it should go back down again, that it should go back down and hit new all-time lows, that it doesn't do. The first months of bull markets,

as you ratchet up most of the prior decline off that steep bottom, you actually find ever more voices always arguing that you haven't hit the lows yet.

Ken Fisher: So, you don't get that clear signal.

Clear signals don't come.

If you're waiting for a clear signal, you're not going to get that for a long, long, long time.

Visual

On the white screen, a chart appears, the chart is showing MSCI world total return index level over early 2020.

Second later a more detailed explanation appears next to the index in a form of small written texts.

Audio

Ken Fisher: Let me just take you back to the COVID bear market.

As the market ratcheted up off of its March lows, the fastest steep bear market in history tied to the lockdowns associated with COVID people kept saying, which is normal, there's too many things to go

wrong for the stocks to keep going up.

Ken Fisher: The stock market isn't reflecting reality, but it did keep going up.

And if you waited for that all clear sign, you actually got to all-time highs before you ever got an all-clear signal that's a lot to lose.

Visual

On the white screen a new chart appears, this time the chart is showing S&P 500 Index Level

Audio

Ken Fisher: Take by contrast, the great Bear market of 2007, 8, 9 people kept looking for new lows for several years after the March 2009 bottom and there was continued view that all of the good things that were happening that were surprising people would morph and turn into bad. What is that?

Again, a lack of that clarity.

But what I want you to see is, the further down the stock market goes, the more you should want to own it.

This is a point that's counterintuitive if you think of this in a different way,

the time to buy something from retailers when they have it on steep sale, not when they don't.

And with stocks it's just a reverse.

The lower the price goes, the more people don't want to own it, when it's actually the time that they should own it.

Ken Fisher: And it's very hard for people in liquid securities to get that in their bones.

But the risk is the least when the fear is the highest.

And sometimes you just have to sit there and say to yourself I'm going to hold my nose and I'm not going

to pay attention to all the nonsense I hear around me.

Prices are down a lot, so therefore I know reduced risk is here at hand and I'm going to just take advantage of that and not really pay attention to what the next few months have in store.

Ken Fisher: The fact is, waiting for an all clear sign is waiting for expensive costs to nail you by locking in losses that you don't need while missing the upside that comes from the beginning of a bull market.

Thank you for listening to me.

Visual

A half white half red screen appears.

Audio

Ken Fisher: I very much hope you enjoyed this video as part of my series on debunking common market myths.

To watch more videos like this, click the link on the screen and make sure to subscribe to Fisher Investments YouTube channel.

Thanks so much for listening to me

Visual

Ken Fisher finished talking, and

A series of disclosures appears on screen: “Investing is Securities involves a risk of loss. Past performance is never a guarantee of future returns. Investing in foreign stock markets involves additional risks, such as the risk of currency fluctuations. The foregoing constitutes the general views of Fisher Investments and should not be regarded as personalized investment advice or a reflection of the performance of fisher investment or its clients. Nothing herein is intended to be a recommendation or a forecast of market conditions. Rather it is intended to illustrate a point. Current and future markets may differ significantly from those illustrated here. Not all past forecasts were, nor future forecasts may be, as accurate as those predicted herein.

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[Music]

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