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| Name: |
MartiniMan
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| Subject: |
Thoughts for investors
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Date:
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10/28/2008 8:42:26 AM
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I heard an interesting perspective yesterday regarding what to do if you are still in the stock market with your IRA/401k/post-tax investments and have ridden it down so far.
Step 1 is to ask yourself the question, when will I really need this money? For me the answer is 15 years.
Step 2 is to ask yourself if you really believe the stock market will be lower in __ years. For me the answer is no, I don't believe it will be lower in 15 years than it is today.
Step 3 is to ask yourself if you think the market is going to outperform "safe" investments (i.e., T-bills, money market, etc.) that will likely be very low for years to come. For me the answer is no, I don't think those safe investments will out perform the stock market.
If you answered like me, especially the part about not needing the money for at least 5 years, then the answer is not to sell, but buy, buy, buy. Interesting fact, in the year after the stock market collapsed during the Depression it went up in value over 50%. After the October 1987 crash we entered a long bull market. After 9/11 stocks went up until the recent collapse. The stock market is based more on expectation than any current reality. As a result, it goes down in anticipation of an economic slowdown and rises before the economic upturn. This is a great time to buy the stocks of solid companies.
By the way, I am not a professional investment advisor. Just a small businessman with a keen interest in economics.
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| Name: |
water_watcher
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| Subject: |
Thoughts for investors
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Date:
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10/28/2008 9:14:37 AM
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Good advice ... but buy today ... most indexes are over 20% below a 50 day moving average and even more when you look at a 200% moving average. There will be a rally to the mean. Now it may come back down, but the market is way over sold right now considering September home sales were "up" and prices were "up" (nationally). Gas prices are down more than a $1 a gallon (I filled up this morning and regular was $2.27). The feds will cut interest rates by 50 basis points this week. The feds are pumping so much money in to the economy it is almost scary and will result in much higher interest rates down the road as things take off and "O" raises taxes. In 2-3 years we may see 10% plus interest rates and very high inflation .... the misery index of the Carter years will be back.
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| Name: |
4thelake
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| Subject: |
Thoughts for investors
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Date:
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10/28/2008 10:14:19 AM
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I only see one problem with buying. If you have been fully invested like all prudent advisers tell you, you have no money to buy. Still a good idea though. I agree now is the time.
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| Name: |
MartiniMan
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| Subject: |
Good point
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Date:
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10/28/2008 10:35:17 AM
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That is the downside if you are already fully into equities and don't have cash in money markets. However, a good number of people over the last 6 months have cashed out as the markets fell and now would be a good time to jump back in. The markets will remain volatile but the trend is going to be upward over the next 5 years.
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| Name: |
water_watcher
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| Subject: |
Good point
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Date:
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10/28/2008 4:09:05 PM
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Exactly .... plus you should always have a portion of your investments in cash or bonds .... now would be a time to shift out of bonds and in to equities.
As I write this the market is up almost 900 ....
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| Name: |
GoneFishin
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| Subject: |
Martini
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Date:
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10/28/2008 10:35:34 PM
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Good points. I think you meant YES rather than NO for point 3. YES, the market will outperform the safe investments.
Step 3 is to ask yourself if you think the market is going to outperform "safe" investments (i.e., T-bills, money market, etc.) that will likely be very low for years to come. For me the answer is no, I don't think those safe investments will out perform the stock market.
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| Name: |
MartiniMan
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| Subject: |
Good catch
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Date:
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10/29/2008 8:20:52 AM
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That's what I get for asking a question with a double negative.....even I can't figure out what I was saying. One other interesting point that came up in a conference call with our Wall Street investor in one of our companies. He was wildly pessimistic for the next 6 to 9 months about the financial markets. Apparently this stems from Barney Frank indicating that it would take 6 to 9 months to develop legislation for the financial markets.
Not only do I think this legislation will be a disaster, but the legislative process will paralyze the financial markets until they see the lay of the land. My only hope if Obama wins is the millions he is taking from Goldman, et al will have some influence that won't completely screw the run of the mill investor. I am not optimistic as I think Obama is going to sign anything Pelosi/Reid send him.
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