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I just sold into today's rally and sold nearly all of my mutual fund holdings (foreign funds: Latin America, Canada, Global Commodities). I'm 18 months from retirement and felt it was the right thing to do because that cash is free and clear (against other losses). I'll need that money to live on until I am old enough to dip into my IRA. I have only 5% of my portfolio in funds now. The rest is in individual stocks and cash.
If Europe were to start stimulating their economy, I think it would be a no-brainer to stay invested in mutual or index funds.
If you're unsure of where things might be going, I would think some active trading in individual stocks could be a safe bet so long as you take profits, limit the downside, hedge, and keep a good sized cash kitty on the side at all times... assuming you have the time to pursue it and aren't a working stiff.
We're still better than where we were on April 12. There is nothing we know right now that indicated definitively which way the market will go tomorrow.
It went up, two days in a row, and we're now 2% above where it was on that day people were spewing nonsensical doom and gloom.
If Europe were to start stimulating their economy, I think it would be a no-brainer to stay invested in mutual or index funds.
I know you said you are skittish about the market right now, but I could present a just as convincing argument why equities will continue to rise...(ie Bernanke's actions over the past couple of years)
You could miss out big time, or you could be right....who knows...for you, since you are close to retirement (like people like Mathjak), you have to make sure you have the right cash flow #1.....
Truth is, you, nor I don't know or can't predict what will happen in the short term....
I have read the bulk of the last 6 pages of comments and can hardly believe what I read. It seems this thread started a few days ago when the market dropped a couple of percent. Then being essentially fickle it started to go back up again. If you try to chase each news item, you will drive yourself nuts. And history proves you are also likely to be wrong and lose money more often than being right. Last year everytime Greece appear in the news, the DJIA lost hundreds of points. This year Greece is just as fragile, its economy is still a speck compared with the world economy, but that is all old news and we are no longer interested. I doubt anyone can predict what will be the next news item that causes the stock market to bounce up or down.
Then I read a lot of speculation about a market correction. Hey, the market corrects every day. I am a stable investor but even I make corrections. I have part of my investments in a balanced fund that automatically maintains a set balance and corrects whenever the ratio is more than 3% from the target. Over the past few months my balanced fund has made a lot of "corrections."
I think the best we can hope for is to look for long term trends. To me the stock trend looks pretty good. Overall the economy is recovering but at a slow rate. Most businesses long since adapted to the poor economic conditions and have been doing well. Low interest rates and QE are having effects on the economy. As a further sanity check I look at the behavior of small investors. Many are still sitting on the sidelines after losing money in 2008. Many moved their 401k funds from stocks to bonds and are still worried. They have already demonstrated a lack of good judgement and are likely to do one of two things: watch interest rates increase and their bond investments erode or return to the stock market at it peaks and then has a major correction.
I don't see anyone with a crystal ball, myself included, so I would recommend not reacting to each short term change or to each piece of financial news which seems to have an impact out of all proportion to reality.
Then I read a lot of speculation about a market correction. Hey, the market corrects every day. I am a stable investor but even I make corrections. I have part of my investments in a balanced fund that automatically maintains a set balance and corrects whenever the ratio is more than 3% from the target. Over the past few months my balanced fund has made a lot of "corrections."
A stock market correction is loosely defined as a decline of 8-12% or more in one of the broad market indicators - like the S&P 500. Even if we're not in a market correction at the moment, we will be in one eventually. The stock market is here for the long haul.
It is inevitable that we will experience many market corrections as well as many market uptrends over decades of investing.
We still don't have a good answer to the issue of how to prevent 30%, 40%, 50% or greater declines in account values without reallocating assets during bear markets. This information would be much more helpful and relevant to most people than trying to time small movements in the market.
BTW, if you're not fully invested in stocks during market uptrends, then you also don't get the benefit of 140% rises in value like we've seen over the last 4 years.
Last edited by BigCityDreamer; 06-10-2013 at 05:55 AM..
A stock market correction is loosely defined as a decline of 8-12% or more in one of the broad market indicators - like the S&P 500.....
Says who? Stock market correction seems to be a very loose term. I hear it used by daily news commentators to refer to any slight dip in the market. I hear commentators talk about dips and corrections when the market closes down a few tenths of a percent from the previous day.
In any case we just saw a slight dip in the market. You can call it profit taking, or a correction, or just a dip. I ignore these slight fluctuations but apparently we have a bunch of investors on this forum who are dumping their stocks at the first sign of a down trend. If any of us could accurately predict the market, we would not be here posting on the internet. Reacting to the small fluctuations is pointless and likely to be costly. If the market does begin to show a large drop (say 10-20%), then selling is likely to be the wrong strategy. I would consider buying additional stocks and would keep buying as the market went down.
We still don't have a good answer to the issue of how to prevent 30%, 40%, 50% or greater declines in account values without reallocating assets during bear markets. This information would be much more helpful and relevant to most people than trying to time small movements in the market.
BTW, if you're not fully invested in stocks during market uptrends, then you also don't get the benefit of 140% rises in value like we've seen over the last 4 years.
How do you prevent it? Take less risk....If I'm 60-70% (or more) invested in equities, there is a chance my portfolio could decline by 1/2...likely? No.
Never treat the unlikely as impossible.
The question is, do you have the appetite to not panic if this happens and you are in the accumulation stage?
For most people, they are taking on riskier investments than they think they could handle...that's why you have so many people dump when the mkt is low when they should be buying more shares...
How do you prevent it? Take less risk....If I'm 60-70% (or more) invested in equities, there is a chance my portfolio could decline by 1/2...likely? No.
...
And where have you found to put the 30-40% that you feel is less risky? Not in bonds, I hope. If so, you could find the bond market tanking due to increases in interest rates at the same time the stock market takes a slide.
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