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Is Now The Time to Buy?
By Meg | March 8, 2008
The stock market continues to “test its lows,” as the TV commentators like to phrase it. As of Friday afternoon the Dow was down to a 52 week low of 11,894.
So is now the time to buy? If not, is it because you think stocks will fall lower or because they’ll simply trade horizontally for many months/years to come?
I’m a “buy and hold” sort of gal for the most part, via my 401k and Roth IRA. I don’t really invest much in stocks outside of retirement accounts (at least I don’t add to my current positions very often). Instead I’ve been focused on maintaining my EF for the last few years (which always seems to get depleted soon after I get around 4 months expenses saved up) and accumulating other reserves for the real estate purchase I recently made.
However just for fun on Friday afternoon I decided to kick $100 over to my Vanguard Life Strategy Growth fund. I have a small chunk of money in there, but I haven’t added much to it over the last few years. Many of the Vanguard LSG shares I’ve purchased were at higher levels than they’re trading now, so I lowered my average cost/share with the Friday purchase.
I don’t think the stock market will be down forever, and I’m certainly not considering liquidating any of my current stock holdings. But nor do I feel particularly led to stock up (no pun intended) on shares right now. Instead I’m feeling unusually conservative, and I think I’d like to have at least 6 months of reserves in cash before I even think of speculating on what the stock and commodities markets might do.
A lot of investors don’t know what to do with their investments right now. American stocks look bleak, so many professional and average-joe investors are pouring money into already booming markets such as oil, gold, international stocks, and other investments which in “normal” times are considered very aggressive and speculative.
As somebody smarter than me once said, when my taxi driver starts chatting about “hot commodities,” it doesn’t exactly make me eager to jump onto that bandwagon. Or something like that. So for now, I’ll let my 401k continue to dollar cost average for me, and I’ll keep the rest of my savings flowing into my Vanguard Prime money market fund.
What are you doing with your investments? Staying the course, betting on a particular sector or stock, liquidating?
More from Meg at The World of Wealth
Topics: Investing |
March 8th, 2008 at 8:40 pm
When investing, one needs to develop a plan for the long term. This plan needs to incorporate the bad times as well as the good. Portfolio construction is more engineering than art despite what the Wall Street gurus want you to think. One needs to determine the desired return and the loss threshold. Then you can construct your mix of equities and fixed income that can give you a strong probability of achieving your desired return/loss threshold.
March 8th, 2008 at 8:50 pm
Use this:
http://www.fundadvice.com/fehtml/bhstrategies/0108/0108a.html
March 8th, 2008 at 9:39 pm
Remember just a few months ago. Everyone was ‘buy, buy, buy’ at a price of around 1.5k (S&P). Now the S&P is hovering around 1.3k and everyone is ’sell, sell, sell’ (or hold/stay out). How can something be a good buy at 1.5k, but not 1.3k? Meg began to touch on it in this article but she didn’t really harp on it enough. We (humans) remember the most recent thing the best. In this case we remember the bad news, poor job market, etc. We don’t remember that the current price is a good deal compared to a few months ago.
Now you may say “Oh, but the stock market is going to keep going down. Any money I put in now will just shrink!” I will tell you “Stop lump sum investing and look up Dollar-Cost Averaging.” If you are able to beat the commissions (say sharebuilder or similar) then just invest a little bit every month. Then if the market does down you will be able to buy more shares per investment. When the market makes its rebound you will then be very happy you did this.
Just remember. 1.3k is cheaper than 1.5k. It should be no question of whether to buy or not to buy.
March 9th, 2008 at 12:45 am
I’m buying and following the market down to 0.
March 9th, 2008 at 3:18 am
free forex signals ( flexible recommendations ) and more..
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March 9th, 2008 at 6:22 pm
I am with you Meg. I have funds in my Roth IRA and 401k and I just buy them and hold them pretty long term. Just recently I funded the hubby’s Roth IRA and I guess we are buying at a low for the year and that is a good thing.
March 9th, 2008 at 6:55 pm
From a selfish perspective I urge you all to buy the market right now. Yes buy and hold. We need more money in the market since the “smart money” is running away.
March 9th, 2008 at 7:24 pm
As Buffett says, be fearful when others are greedy; greedy when others are fearful.
I say the market recovers sometime in the next 20-30 years… will I know when? No. A consistent strategy of constantly setting aside for retirement seems like the best bet to me.
Of course, if the market tanks like 1929, we have bigger problems to worry about.
March 10th, 2008 at 4:27 am
I would still wait a while until the market is less nervous and less volatile. Then it should be a good opportunity for the long term investor.
March 11th, 2008 at 7:05 am
I did buy an extra $2,000 worth of stock about a week ago after hearing that Dodge and Cox reopened their stock fund (DODGX). I’d been wanting to buy into it for years, but it had been closed. I thought I’d get my foot in the door while it was open and the price of stocks was coming down.
If anyone wants a great long-term mutual fund holding, it’s hard to beat Dodge and Cox; check ‘em out.
March 16th, 2008 at 7:21 am
to No Debt Plan:
The market has dropped nearly as bad as 1929 since then… 1973 or 1974 when Nixon resigned as president, and the Oil Embargo/Energy Crisis was going on. The stock market puked. I read somewhere that during that deal the market lost almost as much value as the crash in ‘29 that started the Great Depression.
Remember. over the last 70 some years any rolling 5 year period in the stock market has made money 97% of the time.
in any rolling 10 year period, the market has made money 100% of the time.