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?
Author: Jeremy Vohwinkle
My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.
We took all of our money out of the stock market. We feel comfortable with what we have left after all of the debacles surrounding the "STREET". We no longer feel that the market is trustworthy. We have been purchasing a few properties. They are assets that we are able to control, not someone that makes risky bets with our money. We have done very well with our new investments.
My husband and I are 56 and 57. We pulled out of the stock market about 80% in the first five months of 2008. We have made back about 50% through salaries, a small interest in the 20% stock we do have and cutting back our expenses....
I upped my 401k and am nibbling at the EFA and EEM right now.. My allocation also changed a bit with the inclusion of some foreign fixed and the PFF.
This is an article for debate. I do agree - buy low and sell high. The economy is always in cycles, right now is a pretty good time to buy undervalue stocks and wait for the market it pick up.
There are two schools of thought:
1. If you sell, you lock in your losses
2. If you hold, you may see steeper losses in the short term
I would advise that since you have already taken such a big hit, wait for the recovery. However, since you are and your husband are much older and may need the money soon, you need to see whether or not any unseen short-term expenses can be covered by your emergency fund. If not, I would definitely wait.
I AM 61 ON DISABILITY AND MY HUSBAND IS 81. WE ARE FORTUNATE THAT WE PUT MONEY ASIDE AND WILL BE ABLE TO LIVE ON THAT FOR 2-3 YEARS. OUR PORTFOLIO IS DOWN ALMOST 50% RIGHT NOW. I NEED TO GET OUT OF SOME MONEY MANAGED STOCK ACCOUNTS BUT FEAR THIS IS NOT THE TIME TO TOUCH ANYTHING. IF WE DON'T NEED IT DON'T TOUCH IT NOW. WHAT ADVISE DO YOU HAVE?
I AM 61 AND MY HUSBAND IS 81. WE ARE NOT WORKING AND I AM ON DISABILITY. WE HAVE MONEY PUT ASIDE TO LIVE CAREFULLY FOR 2-3 YEARS WITHOUT TOUCHING ANY INVESTMENTS. OUR PORTFOLIO IS TOO AGGRESIVE IN MANAGED STOCKS BUT WE ARE NOW ABOUT 48-50% DOWN ON PAPER. I FEEL WE ARE BEST TO JUST LEAVE THINGS UNTOUCHED FOR NOW UNTIL THINGS GET A LITTLE BETTER. I AM AFRAID TO TOUCH ANYTHING IF WE DON'T NEED IT FOR A WHILE. HELP?
On other fronts, we had 4 semi-emergencies, which add up to one emptied emergency fund. Lousy timing. I've reduced 401K contributions to the matching level, trying to build the emer fund back up. It's really amazing how fast you can go illiquid, thank god I had the emergency fund or I'd be 30 grand in debt. BTW assuming you own your house, get a heloc if you can. Don't borrow against it. Just have it there. If you have that $20K emergency, it's way better to pay it off at 4 or 5% vs 20% or more for credit cards.
I usu. am 80% core and 20% tactical w/ good results. My market research had me getting nervous late 2007, and I started to DCA out of equities. I've never done that before; I rode out the entire dot.com crash. However, I had resolved not to let that happen again. I lost 12.7% last year, not bad for a guy who was 100% equities to start 2007. Would've done better, but work overwhelmed me last Aug and I missed a scheduled move just before the major leg down. ah well. By Oct 08 I was 100% in my 'stable value' fund, like a money market. I have DCAd my way back to 10% equities, and diversified another 30% from stable value to TIPS/Treasuries/Corp Bonds, but I'm holding there until S&P 700 or July. Risk is still very high. So far this year I'm down 1.5% (S&P down 17%), so again I'm happy with these results. BTW I see S&P 600 before we recover, but it's in the realm of possibility we could dip below 400 (ugh!) - we still have level 3 asset issues in the US., not to mention the disaster of East European banks, another major round of mortgage resets, and the credit card fiasco is just starting.
Yep and its going to get worse thanks to the media spreading panic it as they lobied for the passage of the Wall Street Welfare bill.
See SandySays1.wordpress.com to strike back.
Just started grad school so finally kind of have extra $'s (tho very little heh)
Trying to finally jump into the market w/ a roth ira...
Will probably just put most of it in the market... and see what happens =)
Still maxing out 401k, no reason to stop that with company match. I did pull out of most of my stocks in a broker account. Just watching and waiting, personally I'm waiting for CAPE < 10 before I re-enter...
I haven't changed my allocation, but I did temporarily cutback my 401(k) contributions to the minimum to get the match so I can build up my emergency fund. My goal is to have 6 months' worth in fund. At the end of the year I'll put my 401(k) contribuitions back to what they were. I debated whether to do this, but since I work in the financial industry I figured it'd be better to be safe with a larger emergency fund. I can't eat my 401(k), at least not easily.
Reduced the contribution to 401K in 2008 and haven't bought any stock since. Putting all the extra that would have gone into the market into cash. But I haven't sold any stock either.
I'm 24, so I'm pretty sure the stock market will rebound before I retire ;) I'm not changing a thing. I just wish I had more extra money to push into my 401k.
I pulled about 70% of my assets out of the market a year ago and I have been slowly putting them back in since December. I don't think we are at a bottome, but you can't ever time this stuff perfectly. However, you can time it well enough to add some value to your portfolio.
I'm still contributing the maximum amount to my 401k, although I am getting more and more nervous about that.
I am starting to develop an irrational fear of not having enough cash in case of DH's or my potential job loss, but I'm still sane enough to realize that a 10-month supply of the bare minimum (mortgage, utilities, food) should be enough.