Denial?

I was talking to a relative over the weekend. Professional, mid 40's. We were talking about the stock market, he mentioned that he is just letting his money ride, at the advice of his advisor. I told him he ought to ask what his new retirement date is. He thinks it won't matter. I don't get it. If the market is down 40%, and you are fully invested, your cheese just got moved. What do you guys think?

Doesn't matter to him where it is this year, only where it is twenty years from now.

Yup, but if you have a date, and a "number", that you are planning on, either that dates gotta move out, or the number has gotta get smaller.

Let it ride.If he takes it out he sees a real cash loss.If he leaves it alone it's just a paper loss.It's one of those oxymoron statements.In time the market should recover.How much time who knows.

Vito

If he pulls his money out now, and the market goes back up, then he's worse off than if he does nothing. Yes, if he had had 20/20 foresight and moved his money out of the market a year ago, he would be way ahead. But he didn't. Neither did I, for that matter. Well, I moved a little bit out, but not as much as I should have.

One of the principles of long-term investment is to "average down". The idea is that you invest a fixed amount on a regular basis. When the market is up, you buy fewer shares at a higher price. When the market is down, you buy more shares at a lower price.

I am interested in hearing what YOUR investment strategy is.

Let it ride--if he's in his mid-forties, the current market condition means absolutely nothing to the ultimate value of his current portfolio. The market is, by nature, cyclical, and at his age he is a net buyer of stocks (he buys more than he sells), so this correction is the best possible thing that could happen to the stock market. It's the exact equivalent to having a 40% off sale on stock--hopefully, he's continuing to invest.

(quoted from post at 21:53:24 01/14/09) Yup, but if you have a date, and a "number", that you are planning on, either that dates gotta move out, or the number has gotta get smaller.

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Spook, look at it like this...as long as your planned retirement date is AFTER the market recovers, you're in the good.

Let's say you have $500,000 invested with an average share price of $100/share - you have 5000 "shares".

Now, the market takes a crap like it did, you now have $250,000 - but you still have 5000 "shares".

Now, when you buy, you are buying at the "sale price", so you buy more shares. Nobody knows how long this market will stay like it is, or how it will "recover", but if you assume it stays like this for a while, the longer it stays low, the more you can buy. When your friend says "recover", I'm assuming he means that the market would recover to teh 2008 level adjusted up for inflation/increase. At that point, since you have more shares and the value of the shares is now what it would have been, you are "ahead" of the steady 4-6% you were gaining (2 years ago I was +27%, last year it was -42%).

Except for the struggle of watching your accounts dwindle, and the frustration of realizing that it took you 10 years to accumulate that money and 10 months to lose 1/2 of it. I'm still ok with it. If you're 5 years from retirement, you might want to rethink that date. I'm 15 years away.

mrs 730 got a statement from her investment today lost a third since sept over half since last year

Wife lost $10,000 in her retirement fund this year. That's gonna hurt unless things go up in the next couple.

JD B puller has it right. He doesn't gain or lose anything until his stock is actually sold. I say your relative has a smart advisor. Getting out now is a sure fire way to lose lots of money on his shares. My suggestion is to buy more shares! This is a buyer's market!

Spook,

I don't think you get it. He's in his forties, he probably won't be retiring for another 20 years. That's a long time. The smart thing to do is to keep your money in the market; even though it swings up and down in the long run you're ahead.

An interesting thing I read many years ago used the example of two investors, both 20 years old. The first one puts 10 grand in a 401K every year for ten years, then quits investing at age 30. The second one starts investing at age 30. How long does the second investor have to invest before he catches up with the first? Answer: He NEVER catches up! Start young and keep your money in the market.

Denial, it ain't just a river in Egypt.

Seriously, 9/10 of the time. Hang tight and don't panic.
Have we forgotten it was the "end of the world" when the markets tanked in the 30's,late 1950's,1982,1989,2000 etc.
Buy low, sell high and diversify.

Or you do what he is doing and wait it out, even during the Depression there were ups and downs in the short term market. The market now is very much like the housing market, if you can now is the time to buy, buy, buy. And to the people who say they lost $, you haven't lost anything unless you sold. What was the price you invested at, how long ago, how many dividends/splits,etc..

I am a professional, mid 40's, I am in a 457b not a 401k. I am an agressive investor, down about 50%. I am in the 'double up' years putting $30 K a year into it. I have no worries and would not miss this "mother of all buying oppertunities" for anything. I also want to buy anouther rental house. 30 year mortgages are 4.75 % and going down, houses are cheap and rents high. Hope to loan about $350 K. I will not buy more farmland now, the prices are to high.

Cheese? What cheese? You mean you've got cheese?

My cheese got moved when the market crashed in 2000. So nothing left to loose this round. I'll be working when I'm 90.

the last time it took 20 years to recover.

I wonder how much of this "economy" thing is a self-fullfilling prophecy?

There are companies out there making huge profits, but they continue to cut back (which hurts everyone downstream). I'm not educated on this stuff, just random thoughts...

Kind of like when oil was going crazy last year. The media was hyping it up, up, up. I remember when it was approaching $100 for the first time in November 07, and the big headline was "will oil hit $100 today?" Talk about high oil prices and "poof" there they are. Talk about a recession long enough and you'll get one. I haven't lost my job and neither has the wife, we are still spending just as much as before, BUT not willing to go in debt to do it. just my thoughts.

Google Japanese stock market since 1990. The Japanese had a real estate bubble in 1990. This year the Nikkei index is about 80% off of the highs of 1990; 18 years ago. How is the US different?

The difference is that the government of Japan would not let the real estate speculators that made bad investments go bankrupt and disappear.
I do not think that will happen in the US. Hope not anyway.

I'm 53...retirement is only 10-13 years away. I didn't get to start my 401K plan till I was almost 40. Wife (ex wife) took half of it in '99 in the divorce. Right after that the dot.com bust took away 1/2 again, but my advisor told me to hang in there. I did, so I only had essentially 1/4 of what I had before '99. Since then, I've recovered and been socking away a good chunk of my income. I get a good match from my employer, 50%. From December 2007 to September 2008 I lost 25% again. That was enough for me.
I read the news regularly, and saw this crash coming long ago. I wish I had acted sooner, but my investment man told me to "hold tight, stick it out", whatever. Well, Bull$$it!! In early Sept. I moved everything into a money market account. None too soon... I bet alot of people out there have lost upwards of 40-50%.
As for me, I'll wait until the general smell of the marketplace at large seems to be more positive, and then I will move my cash back into some somewhat agressive mutual funds and hope for the best. At my age I can't stand too many more 25-50% discounts. Even if I end up with less than I hoped for, I will listen to my intuition and common sense and only consider the experts advice.
Not only that, there's so much vice & corruption in the investment world right now it's incredible that so many crooks have gotten away with it for so long. I feel very sorry for all the people that have been duped out of their life savings by smooth talkers and robber baron CEO's that take millions, let the companies go bankrupt and leave the little guys hanging.
Count me out of this merry-go-round ride.

Well, if we had a crystal ball that worked, we could shuffle our money to whatever was at the bottom & moving up to the top. Then we would be a huge winner.

Put all our money in these at the right time, and get them out at the right time?

Microsoft.
dot com businesses.
Houses.
Grains.

We'd all be billionares.

But, if our crystal ball is only human, and we have money in stocks right now, they have already lost 50% or so.

Smart person lets that ride, and keeps buying a few more every month.

Buy low, sell high.

If you need the money in the next 1-3 years, you shoulda got out of stocks & into safer, slow-growth stuff a couple years ago....

If you got 15+ years 'til you plan to use the money, keep riding the wave, stocks go up, stocks go down, get out when they are high & you plan to use the money in a couple years.

Abandon ship now, with 20 years until you plan to use the money????? That's abandoning the floating dingy & swimming back to the sunk ship!

Now, playing the market is a risk, and one should have a couple different investment plans. Stock market is always, and always has been, a big swing, runs inn cycles. One who is investing for their future should probably know this, and plan accordingly. You shouldn't have all your eggs in the same basket.

Right? Buy low, sell high. I don't know how much lower stocks will go, nor how long until they come back up again. But - if they lost 50%, and you don't need the money for for 20 years - it sure looks like this is a buying tome, not a selling time....

--->Paul

That's what they said about the 30s crash, the people's house turn upside down and didn't get any equity till the 50s.

That's what they said about the 30s crash, houses turned upside down and didn't get any equity back till the 50s.

That's what they said about the 30s crash, houses turned upside down and didn't get any equity back till the 50s.

If you sell now you lock in your losses. After you sell what are you going to do, put your money in a savings account and earn 1%? Or put it in your mattresss and hope you don't have a house fire?


Even the most pessimistic posts below say it might take 20 years for the DOW to make it back to 14,000, about a 4% return. I'm thinking it might take 10 years to make it back or an 8% return. If it takes 10 years now is the time to pour money in. If your relative has a company match plan he needs to be buying stock while its on sale. At age 40 the guy has plenty of time, especially since he will probably be working until he's at least 70.


I watched "It's a Wonderful Life" over Christmas and pointed out to my wife the scene that has been the bedrock of my financial reasoning (for better or worse). During the "Panic" Jimmy Stewert implores his account holders to just calm down and points out that the richest man (Potter) in town is buying while everyone else is selling. People are EAGER to sell him their property at 50 cents on the dollar. Later in the movie its pointed out how Potter "saved" (some say stole) all the businesses in town except for The Building and Loan that Jimmy Stewert managed to keep runing by himself.


Either way, what happened has happened, its WHAT IS GOING TO HAPPEN is what you plan for.

The only thing you SURELY don't want to do is sell now. There is lots of pent-up demand for investments on the sidelines right now, waiting for the recession to end. I think stocks will recover fairly rapidly when that happens. But the big question is, how do we get out of the recession? For several years, the economy has been based on everyone buying stuff they didn't really need, with money (plastic) they didn't really have. The philosophy changed overnight (in late October), and now everyone is hunkerin' down, leaving us (and China) with a huge overcapacity relative to lowered demand for goods and services. The adujstment is going to be long and painful, I'm afraid.