With the continued bad news surrounding the economy and stock markets tumbling to levels not seen in over a decade, more and more people are getting out of stocks. Whether that’s the right course of action or not, we won’t know for a few years, but in most cases this is about the worst possible time to make a jump like that.
Understandably, there are those who may have been too aggressive in the past few years for their age or situation, and making some changes to their portfolio is justified. But what concerns me is that I’m seeing more and more young people in their 20s and 30s making some drastic changes as well. Those who have 20-30 years until retirement should be using this time as a buying opportunity. Even if stocks don’t recover for a few years, if you can accumulate money in equities at relatively low prices it’s bound to pay off a few decades from now.
Instead, I’m seeing a lot of young people bailing out and moving into their money market or fixed account option. The rationale is almost always the same. They say that it is just temporary until they see the market start to recover and then they will get back in. Oh really? I have to ask, why did it take more than a year of a market decline before deciding to get out? If it took that amount of time and a 40% loss to make a decision, how can you be certain that you’ll be correct in picking the start of a recovery and begin investing again? My guess is that the market will have already spent months recovering and by the time you jump back in, you’ve already missed out on the bulk of the recovery, thus perpetuating your cycle of buying high and selling low.
But I digress. I’m just curious to hear what others have been doing with their investments lately. Getting out? Hanging tight? Or are you getting even more aggressive?
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About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.