Grrr.....Should I pull out of the stock market?!?!?!

Don't pull the money out. It's only a loss if you cash out. Right now your positions are down, but you haven't lost money yet. The market will rebound and as it's been said in this thread, buying high and selling low is not the way to invest. With long term investments you have to get in the habit of taking a passive approach and not worrying about being up or down after a month.

 

International funds can suffer from giant and painful swings. You need a strong stomach to stay in some of them. The bond fund looks pretty nice with lots of energy stuff.

Mostly I think you are a victim of bad timing more than anything else. The funds will eventually perform but it may take a while. If you can learn to overlook the short-term, then this might be a good learning experience for you. Unless you are a day trader you have to learn to ride out periods of softness once you’ve made your decision. If you are never able to stand any sort of swing into the red and the fear which that brings, then stocks probably aren’t for you and you should go back to CD’s. But you will never get rich in CD’s.

The key to funds specifically more than anything else is to find the right fund and let it compound without looking at the fluctuations too often. Especially if you are new at the market, you will probably find it impossible to determine exactly when the 'right' period to get back in is. By the time everybody is talking about the great market, all the money has been made.

If you really just can’t stand it, I would at least leave a couple of shares behind, just so you can get a feel for the way the market cycles without having too much on the line.

 

That's what winners say. Enron shareholders still have hope!!

jk

 

hey, they did get some back recently

 

Two things:

1. Ignore the "you haven't lost money until you sell" advice. It's nonsense. If your portfolio is $1000 lower now, you've lost $1000. There's no way around that. Your focus should always be on what to do with the money you currently have ($9000) going forward. Your money should be invested wherever you believe will get the highest return from now on. Holding on just because you don't want to show a loss is dumb.

2. On the flipside, trying to time the market is a dangerous thing. No one knows where the market is headed in the short or long terms. Due to the psychology of not wanting to take losses, people tend to often sell at the lows and then buy higher. It's a part of why professionals tend to outperform individual investors.

All that to say, you have to do what you think is right. There's no right solution except in hindsight. If the market goes down, the right choice was to sell now and buy back at a lower price. If the market goes up, the right choice was to hold on. Sorry, I know it's not helpful, but that's the reality of the market.

 

Why did you invest in those funds in the first place? If your answer is along the lines of I did my research and believe strongly in these funds, the sector and the ability of the manager then you're on the right track. If it's something like my Fidelity adviser or friends told me these were hot, then you need to rethink your strategy. The key is to do your research and allocate your investment according to what you firmly believe. I'm not saying ignore CNBC or some broker's advice because they can be good sources of ideas or advice, but it's your money, not theirs.

And if you can't handle your portfolio going down to that much, then you shouldn't be investing that kind of money. You should only be investing what you can afford to lose. If you needed that money for something that might happen soon, it shouldn't be part of your long term investment.

 

Avoid the Mistake of Chasing Performance

If you’re thinking about switching to that top-performing stock or mutual fund your neighbor just told you about, stop and consider this: one of the most serious mistakes investors make is chasing performance—diving into whatever mutual fund, stock, or bond is performing well in the current market environment.

Manage Greed and Fear
The desire for rapid or impressive gains makes it hard to stick to an investment plan over the long term. Many investors want to believe that an investment’s past performance is indicative of its future results, despite warnings to the contrary. They find themselves tempted to scoop up today’s "market darling." The problem is, today’s best performers could be tomorrow’s biggest losers.

Selling when the markets become choppy or decline rapidly is another way investors chase performance. Market volatility can be unnerving, but fear of short-term loss is a flawed reason for taking action. If you sell to simply avoid negative performance, you’re in danger of being on the sidelines during market upswings, which often come unexpectedly and are strong in their early stages.

Missing even a few days of a market turnaround can have a significant effect on your returns. For example, if you invested $10,000 in the S&P 500 Index from December 1991 to December 2006 and didn’t touch it, the $10,000 would have grown to $45,579. If you missed even the 10 best days of the stock market during that 15-year period, your investment would have grown to only $28,397. And if you missed the stock market’s best 50 days, your $10,000 investment would have been worth $8,141.


Source: Bloomberg. This hypothetical investment is for illustrative purposes only and is not intended to represent any particular investment product.

 

I have a few simple questions about the market that they never really explain to us in school.

1) When you invest say, $10,000.00 in a company, that company can now use your investment to invest in whatever they please, correct? Like a new building, or more merchandise.

2) If the above is not the case, where does the money you lose in an investment end up? I know it doesn't just disappear.

 

No - unless you invest in an IPO, the company gets no money when you buy or sell stock. You are simply buying or selling from/to other investors. All it does is change who the owner of the company is. For example, you might buy Apple stock from me - but that's just a transaction between us. It has no direct effect on the company's finances. Where the share price can have an impact is if the company wants to raise more money. For example, if the company wants to sell more stock, the value is based on the current value of the shares.

As to #2, it really does just disappear. Take a simple company ABC that has 5 shares of outstanding stock. If each share is worth $10, the company is worth $50. If each share goes down to $5, the company is worth $25 - the other $25 just essentially disappeared. A company is only worth as much as someone is willing to pay for it. If people aren't willing to pay as much, the value "disappears". If people are willing to pay more, value is "created". The stock market is not a zero-sum game where there is a winner for every loser and vice-versa.

 

They say Buy when there is bloodshed on the street. If you play it by yourself and have patience, the way I recommend is to enter the market at the rock bottom of a bear market, buy when nobody wants to buy, wait for the bull to come and reap profits. It's slow, but it's safer, as long as you buy stocks of companies that aren't likely to go bankrupt. The reward is big if you hang on all the way. Easier said then done, but many have done it and made it big.

Overall, I do not like risking my money in other people's hands. Suppose you found a good fund, a good fund manager can get you 20% of average returns a year, meanwhile, you take a lot of risk for that 20%. Factor in the fluctuations in performance, it takes years to accumulate profit. So I'd stick with buying when there is bloodshed on the street. If I'm gonna risk my money, I'm gonna play it myself.

 

True. That's exactly why brokers would cut off your trade once the loss is below certain percentage of your margin, they treat loss "on paper" is real loss.

 

A big development today was the spike in the Volatility Index (VIX). This basically in simple terms is a measure of fear in the market. During the first two weeks of the market slide of this year, the VIX barely moved. It meant that traders were not fearful enough. But today it jumped big time higher to those fearful levels. It still needs to go a bit higher, for me to say it would be a good time to put your money back in the markets for the short term.

Thus if you are a short term trader, you might see a few days of upside coming in the next few days.

If you are a long term investor, its best to keep your money out of the equity markets unless you really know what you are doing. The recession already began in the fourth quarter of 2007, I believe.

If you talk to your financial advisor he will keep telling you to buy, since he gets a fat commission on whatever mode of action you take.

 

I believe the Fed is expected to lower the funds rate by a full .50 (to 3.75) within the next couple of weeks. There's also an economic stimulus package that might be announced during the State of the Union address ...

If you're going to pull out, I'd say wait until this happens and sell immediately after the market rallies - you wait one day too long and you lose. At least you can recoup some of your losses that way considering you probably still have to pay commissions.

BTW, CDs suck. The only difference between a CD and a high yield savings account is that a CD doesn't let you touch your own money until it's mature. You'll get the same yield, which in reality is only barely higher than inflation - beats stashing it in a bank account, but if you think you're growing your funds you're just wasting your own time and money.

 

If this actually happens I think a recession is guarunteed. I'll keep my money out of stocks and cut my losses at what transpired in the last month.

the 401k however, will be in for a stormy ride.

 

i guess you couldnt see my tongue firmly planted in my cheeck

 

Grizzley, Kodiak, Polar....it don't matter....when Ursidae tears into the flesh of the Ovis, oh what a wonderful sight it is to behold.

RED is so Beautiful

 

Sorry - there were a couple of people that posted that, and I've heard that advice many times before. Just wanted to clarify!