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Jonathan Clements: 5 Reasons Why Stocks are Attractive
By JLP | January 23, 2008
Here’s your reading assignment for today:
Five Good Reasons Stocks Are Attractive Despite Downdraft (free) by Jonathan Clements. I like his second point:
Hitting bottom. A bear market is often defined as a 20% decline in stock prices. As of yesterday’s close, the S&P 500 was down 16% from its Oct. 9 peak. In other words, if this turns out to be a standard bear market, the pain is almost over — and there isn’t much point in bailing out now.
Of course, this could turn out to be far worse than your standard bear market. Investors still vividly recall the brutal decline earlier this decade, when the S&P 500 tumbled 49% from its March 2000 peak to its October 2002 trough.
This sort of multiyear losing streak is, however, relatively rare. Since year-end 1925, we have only had four such losing streaks, 1929-32, 1939-41, 1973-74 and 2000-02, according to Ibbotson Associates, a unit of Chicago investment researcher Morningstar.
Good stuff.
Topics: Investing | 3 Comments »
January 23rd, 2008 at 12:12 pm
I spent part of the morning looking at stock mutual funds to move some of my cash holdings into.
Anyone have a suggestion?
January 24th, 2008 at 5:45 am
If you’ve got the guts to catch falling daggers, go financials, value and reits. A multi-year DCA schedule into the classes getting hit the most should pay dividends as the eventual reversion to mean will mean bigger rebounds over the long term. The funds/ETFs I’m directing 50% of my new money to:
Vanguard Value (VIVAX)
Vanguard Midcap Value (VMVIX)
Rydex S&P Smallcap 600 Pure Value (RZV)
WisdomTree Intl Top100 Dividend (DOO)
WisdomTree Intl Smallcap Dividend (DLS)
Vanguard REIT (VGSIX)
iShares Mortgage REIT (REM)
January 24th, 2008 at 12:43 pm
I don’t know about mutual funds, Ernesto, but take a good look at the industries that are down right now: housing and banking. There are indexes that track each one, so there must be mutual funds for them as well. If you space out your purchases over the next 2 years there’s a good chance you’ll do well (I think).