Comments on: What Do You Do When You’re Too Scared to Invest?

By: Joshua W.

Joshua W. — Fri, 15 May 2009 14:02:54 +0000

Two years later Mike B. seems to have been absolutely correct to be afraid of a peak. If he followed his instinct and stayed on the side-lines or put his money in CDs he’s feeling pretty good right now. I wasn’t that prescient, but I now find myself in the same situation. I’ve got about $100k sitting in cash, and I’m searching the web to find ideas because I’m too scared to invest. JLP asked “if the market fell, would this guy have the guts to get in?” I’m asking myself that very question. I’m leaning towards “no.” For me, I’m too afraid I’ll get laid-off and have to live on the money until I can find a job, and that may be a long time in this economy. Still, it would be interesting to have this topic revisited with the benefit of hindsight.

By: tanyetta

tanyetta — Mon, 14 May 2007 03:03:17 +0000

i want to know what it feels like to just sit on $100 grand.

By: anonymoustroll

anonymoustroll — Sun, 13 May 2007 14:26:58 +0000

The analysis that nobody in the business does revolves around how much money stock markets remove from the economy when they crash… and the sad reality is that because nobody really studies this, nobody knows. Keep in mind that all modern markets use circuit breakers to prevent the kind of crashes (like the kind that happened in the 1930) from ever happening again (or at least offer enough delay that market makers have time to move assets). Free market advocates would argue that this is artificially propping up many markets well beyond sustainable levels. In fact, if markets were held responsible for the the money they subtract from the pockets of finical service consumers during/after crashes, the area under the curve wouldn’t look anything like the 10% to 15% “over the long haul” propaganda offered to the masses by those in the finical services industries.

The stark, basic reality is that investing is extremely risky business and that there are *NO* givens.

When the market crashes (and I say “when” because it’s not a matter of “if”), those who’ve sat on their cash will at least have the comfort of knowing that they only lost 5% per year by not investing it. In fact, that’s my bench mark: invest only the amount of money that, if you lost *EVERYTHING* playing the market, would have been equivalent to what you would have lost by sitting on your cash. So, in this case $5k per year would have been about right. Take the the remaining money and do something you enjoy… preferably in some type of money making venture over which you have direct control.

By: Hazzard

Hazzard — Sun, 13 May 2007 01:38:58 +0000

My aunt is 62. She is retired and is living comfortably on her pension and social security. (So comfortably in fact that she tries to give all of her family members money every month)

She also has about $150K in a 401K. She never plans on using this money for anything, but rather just keeps it to give her some financial security. Over the last 6 years or so, she has ridden the rollercoaster of the market and has actually done fairly well. Now that the market is at it’s peak, she is extremely nervous that it will go down and she will lose some of it. So much so, in fact, that she loses sleep over it. The reality is that only about 35% of the total is actually exposed to stock via a mutual fund. The rest is in bonds (in the same mutual fund) and then a large chunk is in CD’s. She isn’t that exposed and her account doesn’t swing very wildly but she just can’t take the stress of the potential of it going down so she moved it all out to cash. (as of a couple days ago). Now she has it all in CD’s and is sleeping fine. She loses the potential for larger gains, but also feels like she has managed her risk better. I’ve at least got her in 5% CD’s (short term) for now. Her plan is to just take those returns for the next few years.

We have talked at length about the pros and cons of her portfolio but in the end she just couldn’t take the stress of the market.

By: fivecentnickel.com

fivecentnickel.com — Sat, 12 May 2007 10:40:20 +0000

Weekly Roundup – 05/11/07

Here’s a quick look at the articles that caught my eye over the past week…

Jim hates credit card cashback teasers. Funny, because I just posted about one such reward credit card offer.
JLP has some thoughts on what to do when you’r…

By: dimes

dimes — Tue, 08 May 2007 19:19:28 +0000

IAWTC.

By: Customers Revenge

Customers Revenge — Tue, 08 May 2007 13:39:22 +0000

I just replied to a similar topic on another blog and thought parts were relevant: In compound interest, like stock returns, the sensitivity is with time and interest rate. The initial investment almost doesn’t matter, just invest something, anything, to get the benefits. If you have 100K the get it in play to expose yourself to time. By sitting on the money in a bank account you lost both interest and time.

By: Customers Revenge

Customers Revenge — Tue, 08 May 2007 13:16:33 +0000

Definitely no dollar cost averaging for $100K (unless you’re going dollar-cost average 25K over maybe a month . . . but then that’s not much of an average) You’re better off dumping the lump in and getting the value of time rather than whatever small percentage you’ll gain from buying at a lower price.

Just buy an index and sit on the money in the index for a few years instead of in the bank.

How did you get the $100K? If it was a business or investment then just repeat that if you’re not comfortable investing in equities.

By: Independent George

Independent George — Tue, 08 May 2007 12:55:46 +0000

Ack. I need an editor.

By: Martha

Martha — Tue, 08 May 2007 03:13:44 +0000

Thanks for this website. Lots of good information.

For many people, simply deciding what to do with 100k would be paralyzing. There are so many places one could invest it that it would be easy to become overwhelmed with fear over making the wrong decision.