Comments on: Don’t Run From the Bear

By: Bozo

Bozo — Tue, 15 Jul 2008 03:06:52 +0000

I know I’m beating a dead horse here, but it helps to be diversified. Stocks, bonds, cash (in laddered CDs), real estate, they all belong in your asset allocation. Stuff goes up, stuff goes down; the trick is to try to have some stuff that is going up while other stuff goes down. Trying to time markets is pretty hard, just ask Bill Miller of Legg Mason this year. A well-diversified portfolio probably won’t be a “get rich quick” scheme, but it probably won’t be a “get poor quick” scheme either. If you’re working and can do so, just dollar-cost average into your balanced 401K, sock a bit away in safe laddered CDs for a rainy day, and keep a positive attitude.

Just my $.02.

Yours,

Bozo

By: Jesse

Jesse — Mon, 14 Jul 2008 10:53:15 +0000

The total return can fluctuate so wildly depending on the time-frame you’re actually looking at (both in the total time span and the starting point) so it’s hard to put stock into any numbers I read anywhere.

My strategy: keep investing.

My other strategy: build other income streams as well.

By: Wilson

Wilson — Sun, 13 Jul 2008 04:12:03 +0000

In the words of Richard M. Salsman, “Anyone who bought stocks in mid-1929 and held on to them saw most of his adult life pass by before getting back to even.”
nowthatsdumb is right. From 01/03/2000 to 06/30/2008, the price of S&P500 ETF SPY dropped 6.8%. Taking consideration of the approximately 2.2% pretax dividend and 10% federal dividend tax, the after tax return of SPY in the same period would be 11.3%, and annualized to be 1.27%. And that doesn’t include the devalutaion of the USD.
Keeping cash in a CD account at an interest rate of 4.5% definitely beats the investment in S&P 500 for the same period.
Given the prospect of Fannie & Freddie default. Keeping Cash under the mat seems a great deal. I’d just do it. Thanks a bunch JLP!

By: kim

kim — Fri, 11 Jul 2008 21:50:19 +0000

As of close today I am going back into the 2040 life cycle fund in my tsp. I have been waiting out the last few months in the LIncome. I dont like a wild ride, but I appreciate that at some point I have to go back in or end up with a much smaller pot. If I sit around waiting for the bottom I wont react quickly enough for the recovery.It’s probably going to go down some more before it’s all over with, but within the next 30 years I am confident I will come out ahead. If nowthatsdumb guy wants to share some of that skill to do something different with me I’m listening. Go to tsp.gov and hatch me a plan.
PS what should I do with my gld and hcn in my roth? Baaaa

By: JLP

JLP — Fri, 11 Jul 2008 18:40:08 +0000

Sam,

“nowthatsdumb” is just trying to be cute. He keeps all his money under his mattress but don’t worry, he’s paying himself interest.

By: sam

sam — Fri, 11 Jul 2008 18:36:48 +0000

So, “nowthatsdumb”, if riding out bear markets is the wrong thing to do, and asset allocations is the wrong thing to do, then what is the right thing to do?

By: nowthatsdumb

nowthatsdumb — Fri, 11 Jul 2008 16:56:04 +0000

Oh and Asset Allocation no longer works but it will take 5 more years before you figure that out. The benefit has been tapped.

By: nowthatsdumb

nowthatsdumb — Fri, 11 Jul 2008 16:54:38 +0000

Missing the ten best days is yet another propaganda piece spewed by Wall Street.

How about trying to miss the worst 10 days. Wall Street doesn’t publish those numbers cause it’s not in their best interest.

Sheep.

By: Randel

Randel — Fri, 11 Jul 2008 16:24:33 +0000

All good advice but the problem is that each downturn looks like the sky is falling and this one may indeed be. We have a perfect storm: high energy, inflation, credit crunch, and now bank failures to the point that we are basically seeing a run on the banks. How much financial shock can the system absorb and can the government continue to print money forever? Sure we will survive, but nothing says that we are not into 5-10 years of painful recovery like seen in Japap, Argentina, and elsewhere.

By: Stephen

Stephen — Fri, 11 Jul 2008 15:54:34 +0000

Just remember that when the market turns, if you miss the ten best trading days of a new bull market you will forgo something like 90% of the total gain. If you are fully invested in the S&P 500 you do not own a diversified portfolio. Asset allocation is the key.