'k, nobody else is saying it, so i will ...

what the he** are we little people supposed to be doing to protect ourselves from the latest wall street meltdown?! i'm in mutual funds with vanguard and i totally get the "stay-the-course-don't-time-the-market" concept. but this is reaching nightmare proportions. i'm probably down 25% for the year, and it looks to get a lot worse. i wouldn't be surprised if i wind up 50% down or even more, and this looks like it'll take years to recover. i rode out the dotcom burst and 9-11 and i always knew that was the right thing to do. now i'm not so sure - tho the time to get out is probably past. any ideas fellas?

Well - kinda too late to act/react now. I'm stuck in the same predicament and have no choice but to ride it out and hope it goes back up and I can recover some of the loss.

With stocks this low it is probably a great time to buy (if you can). At least that is what I always heard.

Like I have always heard, "when you have no choice, be brave".

:cry:

When would you need the money in those mutual funds? If its not for a long time statistically you are better off riding it out because you already have taken a hit.

If you are riding it out and its after tax money (not in an IRA, 401K etc), you should do some 'tax law harvesting'. Exchange the funds into a similar fund within the family and take the capital gains loss for tax purposes. After 31 days you can move the funds back into the same fund and continue. This way you can have the IRS subsidize some of your pain.

If you think you will need some of that money soon (like within 5 years), then its a tougher decision. In that case you may want to take some it off the table, depends on your risk tolerance and ability to sleep and night and function during the day.

Hopefully you have other savings besides your investment accounts. If not, set something up. Also, talk to a financial planner and really start learning the ins and outs and what's what.

Next, markets have historically rebounded and then gone on to make new highs, so there is no reason to think this will be any different. If you're not all that close to retirement, then riding it out is the best way to go.

If you are looking for the best way to capitalize on this crisis, and you have a bit of discretionary funds, maybe start thinking about increasing your contributions. I know it sounds crazy, but if your fund is down 25%, think about how blown down all stocks are. Now is a great time to do a little "dollar cost averaging," which means that your overall investment will be cheaper in the longer term because you can buy more shares of stock for the same money now than you could say a year ago. This also means that your account can grow at a faster rate when things start to get better. Just make sure you aren't using money you can't afford to lose.

pawpaw said:

With stocks this low it is probably a great time to buy (if you can). At least that is what I always heard.

Click to expand...

that's what i always heard too. too bad the market is down or i would sell some of my stock to buy some stock (!) :surprised::cry:

jderimig said:

When would you need the money in those mutual funds? If its not for a long time statistically you are better off riding it out because you already have taken a hit.

If you are riding it out and its after tax money (not in an IRA, 401K etc), you should do some 'tax law harvesting'. Exchange the funds into a similar fund within the family and take the capital gains loss for tax purposes. After 31 days you can move the funds back into the same fund and continue. This way you can have the IRS subsidize some of your pain.

Click to expand...

Isn't this just robbing Peter to pay Paul? In other words, if I do this, my basis is that much lower when I go to sell again some time in the future.

However, there is one fund I have been meaning to move out of, but have held off because of the tax hit. I'll have to look at that again - this may be the perfect time to transfer out of there. Not only will the gain be less, it might actually be a loss!:cry:

If you think you will need some of that money soon (like within 5 years), then its a tougher decision. In that case you may want to take some it off the table, depends on your risk tolerance and ability to sleep and night and function during the day.

Click to expand...

My earlies need would be getting my older son started in college in 7 years. I suppose that's a long enough horizon that I can afford to wait ... I hope!

joecooler said:

Isn't this just robbing Peter to pay Paul? In other words, if I do this, my basis is that much lower when I go to sell again some time in the future.

Click to expand...

Good question, but here's the dirty little secret about mutual funds (non-index ones anyways).

No doubt the manager of the fun is buying and selling shares during the crisis. They are going to incur some capital losses probably, but the IRS does not allow mutual funds to distribute losses to the fund holders. When those shares get back to 'even' for you, there are going to be some big capital gains distributed to you that are taxable even though you are even. So if you plan to hold on to the fund, harvest the capital loss so that you can offset some of gains you will have to claim later.

I think if you're more than 5 years out from retirement, you need to quit checking your share prices.

I'm 47, so I don't even look anymore. I figure I'm buying lots of cheap shares these days. They will eventually go back up, and I think we'll have a long upswing when this is over.

BR549 said:

I think if you're more than 5 years out from retirement, you need to quit checking your share prices.

I'm 47, so I don't even look anymore. I figure I'm buying lots of cheap shares these days. They will eventually go back up, and I think we'll have a long upswing when this is over.

Click to expand...

yeah, i keep trying to tell myself that. sure hope you're right!

i don't really check quotes daily, but when i download bank/credit card info in quicken, i get all that stuff automatically. maybe i should just stop downloading ...

I think the solution is for everyone to send me their money. I will then put it in a locked magic box, which I will then return to you, but don't open the box until I am out of the country, err, I mean, until it starts to overflow with more money. If you open the box and find only an old phonebook, this means you are very special and the money has converted to something you can use to tell other people about this wonderful opportunity.

Guys,

We all tend to believe we live in the worst of times. We fear for the future because there's no guarantee. However, as history shows, there is a guarantee - sort of. Never bet against the U.S.financial markets.

So - as a history buff, I was guessing it was about time for a significant market correction. Especially considering the absolutely wacky loans there were out there. B-paper ARM's to folks who have a long history of defaulting on loans?!?! Are you HIGH??!! $1 million for 1700 sq.ft. stucco-boxes here in CA?! You've GOT to be kidding me! It had to end. But it's still not as bad as it has been in the past. And my gut says that with the bail-out package, it'll be a little rough, but it'll recover fine.

As a reference, here are the 10 worst market declines in the history of the DJIA. (from about.com) Note that we're not even close to the worst... at least not yet. Even black Monday (1987 - 22% drop) didn't make the top 10. (Note also there's roughly a 10-year cycle on these things... an important lesson to learn.)

10. (Dot Com bust followed by 911)
Date Started: 1/15/2000
Date Ended: 10/9/2002

Total Days: 999
Starting DJIA: 11,792.98
Ending DJIA: 7,286.27
Total Loss: -37.8%

9. Date Started: 11/21/1916
Date Ended: 12/19/1917

Total Days: 393
Starting DJIA: 110.15
Ending DJIA: 65.95
Total Loss: -40.1%

8. Date Started: 9/12/1939
Date Ended: 4/28/1942

Total Days: 959
Starting DJIA: 155.92
Ending DJIA: 92.92
Total Loss: -40.4%

7. Date Started: 1/11/1973
Date Ended: 12/06/1974

Total Days: 694
Starting DJIA: 1051.70
Ending DJIA: 577.60
Total Loss: -45.1%

6.Date Started: 6/17/1901
Date Ended: 11/9/1903

Total Days: 875
Starting DJIA: 57.33
Ending DJIA: 30.88
Total Loss: -46.1%

5.Date Started: 11/3/1919
Date Ended: 8/24/1921

Total Days: 660
Starting DJIA: 119.62
Ending DJIA: 63.9
Total Loss: -46.6%

4. Date Started: 9/3/1929
Date Ended: 11/13/1929

Total Days: 71
Starting DJIA: 381.17
Ending DJIA: 198.69
Total Loss: -47.9%

3. Date Started: 1/19/1906
Date Ended: 11/15/1907

Total Days: 665
Starting DJIA: 75.45
Ending DJIA: 38.83
Total Loss: -48.5%

2. Date Started: 3/10/1937
Date Ended: 3/31/1938

Total Days: 386
Starting DJIA: 194.40
Ending DJIA: 98.95
Total Loss: -49.1%

1. Date Started: 4/17/1930
Date Ended: 7/8/1932

Total Days: 813
Starting DJIA: 294.07
Ending DJIA: 41.22
Total Loss: -86.0%

And if you combine the 1929 decline and the 1930-1932 crash (thus ignoring the slight five month increase from Nov. 1929 to Apr. 1930 ) you actually get a -89.2% drop! (381.17 drop to 41.22)

So next time someone tries to claim that this current market correction is tantamount to the great 1932 stock market crash, realize that it's just a bunch of alarmist horse waste. And though I'm certainly not breaking out the rose-colored glasses on this, history is on our side. My best advice is take a deep breath, chow down some Tums, and "buy, buy buy!"

Ashley

So we're all in the same boat. A buddy of mine decided to cash in his 401-k, take the hit, and bought a ranch. At least his land will be cheap, paid for, and he can have some beef walking around and get a tax break to boot. Might not be a bad idea...

melsman said:

Guys,

We all tend to believe we live in the worst of times. We fear for the future because there's no guarantee. However, as history shows, there is a guarantee - sort of. Never bet against the U.S.financial markets...
Ashley

Click to expand...

How does my locked magic box fit into all this?

Long term there will always be gain, until the Mass Extinct Event hits us anyway. Worthless desert is now prize real estate. Dangerous swamps become seaside living, albeit prone to extinction by storms. Fast food discharge becomes a new fuel for cars. Put enough cows under a big enough tent and even cow farts become gold as they rise to the methane collection intake.

Chr$ said:

So we're all in the same boat. A buddy of mine decided to cash in his 401-k, take the hit, and bought a ranch. At least his land will be cheap, paid for, and he can have some beef walking around and get a tax break to boot. Might not be a bad idea...

Click to expand...

It just like I said 6 years ago.

My 401K came up 404-wealth not found.

Well Stated Melsman!
My thoughts exactly, Take a deep breath...everything happens in cycles!

I'm not concerned in ths slightest.

It all comes down to system dynamics.

You had an inflated bubble, and it burst. Just as we had above normal gains during the housing boom, you're going to see below normal losses in the next few years as the market tends to correct itself.

As Ashley stated, its happen many times before, and corrected itself the same number of times.

What he said!

Thanks for the perspective Ashley.

Mark

Same thing back in the early nineties. The market fell over the span of a few days and there was a twenty/thirty something guy in our office running around trying non-stop to get hold of his broker and generally worrying about what to do until one of the older guys points to Ken by the window. Ken is in his sixties and two years or less from retirement. The older guy reminds the twenty something that Ken has "lost" close to a $100K since yesterday and then points again. Ken is quietly working away, doing his job, and not a single drop of sweat was expended over the events on Wall Street. Ken had seen the cycle too many times before to be worried.

Buy! Buy ! Buy! :surprised:

This is the time to do it!

I just checked my 403B account. -28.3 Year to date! but I am about 25 years from retiring, maybe...... I just forward to seeing it on the + side when I retire.

Those extra shares bought when it was LOW will pay off! :lol:

I should be be increasing my % going into my account.

Here's another piece of advice-

Don't listen to Jim Cramer. He's a tool and more often than not he's wrong. I know, none of the talking heads are ever that accurate as it's near impossible, but this guy really takes the cake.

Need proof?

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I look at it the same way...right I'm about 12 years from retirement. I consider this a time when stocks are on sale! Eventually, things will recover and I will benefit from the bargain basement prices we have now. (I've also invested a significant percentage of my funds into international stock funds, with a focus on Asia. I didn't want to miss out on the booming markets we have in China and India and the future markets that will be found in other developing countries).

Craig

I keep trying to remember what you guys are saying and I know it's true - the markets are cyclical, what goes up will come down and vice versa. But I also know nothing is guaranteed and the US hegemony will end sooner or later - and from the looks of things I think it's going to be sooner. We've already mortgaged so much of our country to Asia and the Middle East, and it seems we no longer know how to make much of anything. The day will come when the US won't be the best/safest place for the world to park the $ and when that happens I think the maxim that over the long term stocks go up, will no longer hold. I wish I could share everyone's optomism but I don't think it's realistic. Just 'cause things were great in the past, there is no guarantee they will be in the future. I'll continue to invest in stocks 'cause I really don't know what else to do, and I'll hope you are right, but I have this bad feeling you might not be ...

Well, there is only so much selling that can happen. While the markets can stay in an oversold condition for quite some time, they eventually have to go up. It's the nature of the business. So fear not!

You might consider hitting up Barnes and Noble and picking up a few books on the subject to ease your mind a bit.

I'm also 47, but unlike most on this thread, I do want to actively watch my money. I don't manage it at the lower level as I hire people to do that, but I learned from a too laissez faire attitude I had in 1999/2000 (lost about $3M in value at that time) and will never let someone manage my money without over-arching control.

In the recent case, I was fully invested up until December of '07 and then went to a 50&#37; cash position (telling managers to liquidate positions and move into the money market). In April of '08 I sold the rest of my positions in the market and went to 100% cash. The two overriding principles employed: 1) Dow triple top in December of '07, 2) "Where there's smoke there's fire" in April of '08 when the Bear Stearns default was in progress. Basically their trouble was just too close to the mainstream financial markets and likely spelled deeper issues.

I know all the arguments about timing the market, but frankly, I think these macroeconomic moves are pretty obvious and move slow enough that there is little risk in missing the big moves. So I let the money managers worry about the financial analysis and buying the right companies at the right price. I'll worry at a high level where my money goes to work. BTW, currently increasing investments in Life Settlements and Muni's.

BR549 said:

I think if you're more than 5 years out from retirement, you need to quit checking your share prices.

I'm 47, so I don't even look anymore. I figure I'm buying lots of cheap shares these days. They will eventually go back up, and I think we'll have a long upswing when this is over.

Click to expand...

I commend you for managing your money rather than letting it manage you. Most folks don't know what a triple top is, let alone what it means, and that you were paying attention to what the Bear Sterns collapse meant says quite a lot. If more folks took a hands on approach and an active interest in their investments, I think America would be better off.

Anyway, congrats. You've made me proud.

dixontj93060 said:

I'm also 47, but unlike most on this thread, I do want to actively watch my money. I don't manage it at the lower level as I hire people to do that, but I learned from a too laissez faire attitude I had in 1999/2000 (lost about $3M in value at that time) and will never let someone manage my money without over-arching control.

Click to expand...

Is simply calling this a natural part of the stock market cycle entirely correct ?Should not certain practices be changed ? Governments are having to bail out their financial sectors across the globe as the stone thrown in the US pond spreads it's ripples right across the world. People are losing their homes and livelihoods right across the planet not getting dollars shaved off stock portfolios. This event is causing a tremendous amount of real sufferring and shows signs of getting worse.In my opinion this could have been in large part prevented by sound regulation in the American banking sector. I think that things will get better but unless somone reins in the 480 million dollar a year thieves then we will see more of the same if not worse.
Cheers
Fred

$480 million a year...I forgot the guys name who is or was the head of AIG but he was on National Public Radio yesterday to set the story straight.

He does NOT make $480 million a year, that is an exaggeration. He only makes $250 million a year!

I was broke before...I'm still broke!

Maybe I'm just more broke.

Fred said:

Is simply calling this a natural part of the stock market cycle entirely correct ?Should not certain practices be changed ? Governments are having to bail out their financial sectors across the globe as the stone thrown in the US pond spreads it's ripples right across the world. People are losing their homes and livelihoods right across the planet not getting dollars shaved off stock portfolios. This event is causing a tremendous amount of real sufferring and shows signs of getting worse.In my opinion this could have been in large part prevented by sound regulation in the American banking sector. I think that things will get better but unless somone reins in the 480 million dollar a year thieves then we will see more of the same if not worse.
Cheers
Fred

Click to expand...

Well, bubbles have a tendency to burst, so I would consider it a natural evolution of things. Have you noticed that things seem to happen about every 10 years or so, give or take? In the late 80's it was the savings and loan crisis. The late 90's/early 2000's was the dot com bubble and now in the late 2000's it's the mortgage/credit crisis.

And most stock market crashes are the result of something being mishandled or blown out of proportion. When you have dramatic growth in any kind of sector, the markets are known to self correct in violent fashion.

There is absolutely no doubt that this crisis was the direct result of carelessness and greed from both sides of the spectrum, so you can't fault just one side in this crisis. Financial institutions were under immense pressure from investors and the government alike to increase home ownership for folks who couldn't qualify for or afford a normal home loan, labeling the lack of some economic classes of individuals to qualify for traditional loans as racist. This caused a domino effect in the financial sector. One company was making a fortune on it, so they all had to do it.

Then you had folks who were buying homes under these new lending practices with dollar signs in their eyes. They were using their homes as savings accounts and looking to make a quick buck. I mean hey, why not? If you can double the value of your home and then sell it, it's a quick way to make a couple hundred thousand, right?

So this crisis was created from all sides, not just from one. But things will eventually get better. Yes, things might get worse before they get better, but things will start to look up.

Let me give you an example of something that is happening right now. Oil is getting cheaper. This means gas prices are going lower, giving more folks some extra discretionary monies to spend. More goods will be bought, which means production levels will have to increase. Production increases means more hiring, so you now have more people working. More people working means more folks paying their bills and buying things. Companies start to expand. Those projects put on hold start to get finished...

No, it's not something that will happen right away, and in fact could just take more time. It is an example of how the markets will find their way out of this mess.

I for the life of me cannot figure out why people have a problem with how much money CEO's of private companies make. They obviously have a skill set that very few people have and that the market deems is worth the salaries they get. And most CEO salaries are performance based, meaning that while they have a base salary, they get bonuses based on the overall performance of the company. I don't get why people are opposed to that? That's the way it's supposed to work in a free market!

Regardless of how much the CEO of AIG made, let's also not forget that he voluntarily forfeited his severance package when he was let go. Funny how I don't see the main stream media bringing that up. Only that he is evil because he made huge sums of monies for doing something that most of us couldn't fathom.

Just put all of it in here...



You are welcome.