seattle prattle wrote:
investing is not done collectively that i know of.
“Investors collectively” refers to the fact there is no cash on the sidelines and likewise there is no stocks on the sidelines. Someone always holds those assets at each moment in time. So in a bear market stock “investors collectively” hold the losses just as they hold the gains today.
Now if one investor can successfully navigate markets then good for you or them. But that is not history and actually investors’ performance has been rather poor versus the indices. And stock markets do not compound at an even 8-10% because they also compound at negative rates in a bear market, this is especially harmful for those in retirement who are withdrawing funds in a down market (reverse compounding). The importance here is sequence of returns. You retire right before a bear market your financial plan could be in jeopardy if you are over allocated to stock.
You are correct investing is not done collectively, but the collective returns of investors as a group over time have significantly underperformed the indices.
Why is that? Over excitement at the top and disinterest as the bottom. Poor asset allocation relative to liquidity needs and risk tolerance.
None of the above is or should be controversial. It is the history of the markets.