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I say go with bond funds like inflation protected ones and stock funds that buy stocks that give dividends.
But where? That's my quandry. Index funds? Mutual funds? Stocks? I'm young and can take some risks. The future is wide open.
Yana: I hope that if you get out tomorrow that you haven't sustained any major losses over the course of your investing.
So.... I will still do some dollar cost averaging. I may not split the full amount over 12 months but probably 3-6 months. This way I spread out the pain somewhat if there is a continued drop and take advantage of any deeper discounts.
One thing people only staying on the sidelines have to remember is that you invested in the market because you believed in it. This might however be a good time to evaluate how much risk you are willing to tolerate (seeing the current drop in your portfoliio). If you believe, keep buying on the way down. If not, you shouldn't have invested in the first place and any future money should be put in something much less risky.
Even chart fool knows next is 10,000, Cramer's right, it's 8,000 after that.
Good luck with you recent investment.
Brian ~aka Glymmar
http://adollaradayquest.blogspot.com/ (remove this link if it's not appropriate)
I would strongly suggest in the future that if you want to time the market this precisely, then buy an ETF instead of an index fund - since ETFs trade like shares you will get the market price when the trade is executed.
It's going to get worse, but I'm banking on a short term pop so I purchased 100 shares of SSO(s&p 500 proshares ultra etf) in my gambling account today after the 8% haircut. If all works out I'll be dumping it for a 5-10% gain in the next few days(easily doable as it uses leverage to double the movement of the S&P)
I'll start dollar cost averaging down soon, but it doesn't feel like we've hit max pain yet. 35% is a good solid recession. This is probably going to be a bit worse. The S&P and Nasdaq are off 30% right now so we're getting there.
Scary times.
I would also have encouraged you to get the ETF. Why not? Lower costs over the long run and trades like a stock. You could guarantee what price you pay tomorrow without having to wonder.
"The $3,000 is not money marked for retirement, it is from money set aside for some of my more intermediate goals."
That's the point that should be bolded. Most people arent' in your position and should just sit tight and save cash.
Plus, you're young and don't have dependents (I think) which adds to your ability to "justify" this type of move. I'll be watching to see if it works for you. Good luck.
I wish I had the cash right now to do the same.
Most people feel like the bottom is still a little ways away. Even Flexo said he felt the crisis would end in the next few years or so.
Even though the stocks are on sale now, I think most agree they will be going even lower in the near future.
DCA allows you to buy over a period of time and take advantage of continued drops in the market while letting you buy stuff now in case the price rises earlier than expected.
Starting next year, I'll be DCA-ing both my Roth contribution and a Vanguard account as well, the latter being used for wealth building. If the market doesn't turn around by then, I'll be able to by some more stocks on sale as well. But the truth is, I would rather see the market turn positive before next year.
So don't just buy whatever's on sale. Shop with glee, but only what you can believe in. Remember, you're investing in a company.
I've still got $1000 of room in my 2008 Roth, but didn't hit the button yesterday. If there's another down day this week, I might have to finish off the Roth contributions for the year.
http://moneycentral.msn.com/content/P104966.asp
I don't trust Cramer's opinions so much. And every person I know who works in the field has a different opinion from each of the others (and readily admits that it's a crapshoot what will actually happen).
No bailout, let the companies fail, let's learn a lesson from this. Let's acknowledge and take responsibility for our mistakes. Let's live within our means.
I don't believe you understand the severity of the current problems. All credit is not created equal. There are bad mortgages that got us into this mess, but there are legitimate needs for credit that businesses have for everyday operations like giving you the money you want to withdraw from a bank or paying your salary. Do you think banks keep your deposit in a vault earning nothing while paying you interest because they like you? They don't, right? The money is invested in their business i.e. they use it normally to give loans to businesses, student loans, mortgages, etc. What happens then do you think when a lot more people come to withdraw money then to deposit in a short period of time? As now, for example, when everyone who has over 100K in one bank, and even some of those who have less try to withdraw money? What according to you they are supposed to do? Say, oh we cannot pay you today, we'll wait until next month when we get payments on our loans? You wouldn't like it, would you? What banks do is to borrow money from another bank at a low interest rate, then repay when they earn money. This interest rate is normally at 2%, but now it is at 4%. Not only that, the banks don't want to loan to each other because they are afraid and because the cash now is more precious to them, but also because there are fewer banks. So banking industry cannot operate normally and even sound banks may be at risk. The banks are also reluctant to lend to businesses, even good businesses with good balance sheet, good history and legitimate needs.
What do you think a transportation or a construction company does when they need money to pay people salary to do the job, but will not get paid until the job is done? They borrow, pay people, get paid by customers, then repay the load and invest profits back into business. Similarly your company, may not necessarily get money from its customers just in time to pay your salary. Since you are so against credit, do you expect businesses to just keep all their available cash in checking accounts earning nothing just waiting to pay your salary? Then they couldn't operate or make money.
Right now it is very difficult for companies to get loans. The credit market is frozen. So businesses suffer. If this continues many businesses may not be able to pay salaries. Care to guess what they'll do?
Then there are people who wouldn't be able to get mortgages even if they have a nice down payment and can easily afford it because the banks aren't willing to learn. Only the rich will be able to go to college.
This is not about bailing out a few bad banks, it is about the whole financial markets and ultimately about our jobs. Also our 401K - are you enjoying this year so far? How low do you think your 401K will go if good companies that have nothing to do with financial industries start failing because they cannot get credit.
" No bailout, let the companies fail, let’s learn a lesson from this. Let’s acknowledge and take responsibility for our mistakes. Let’s live within our means."
Sure and who cares about all those bank tellers and computer programmers and ... who also lose their jobs when these companies fail. Then other companies fail those that had nothing to do with this crisis. Then your company may not be able to pay your salary.... Get the idea?
What living within our means has to do with the possibility of a total collapse of a financial system? Will a "lesson" help you pay your bills if you lose your job? And I don't mean for a few months, I mean for a few years as if we have this collapse, it'll be a while because there are jobs available. Will it help your 401K get back what you lost (unless you sold a while ago).
As to what I am doing now. If the bailout is not approved, I think the market will crash badly. So at the moment I do nothing. I have cash, but I am not willing to increase the percentage of my assets I have in the stock market. I might look at my portfolio, sell some stocks which I don't think have good prospects and buy others. But I am not sure yet what to do.
If only our government could explain it so well. I'm in basic agreement, but we did need provisions to prevent rewarding of the most guilty individuals. I'm not sure if that was accomplished.
Thank you for this post, Flexo. I think this is an opportunity too, but family and friends think I'm crazy. If I am, then at least I'm in good company.