do we go from here?
and moving forward:
a brutal October that witnessed unprecedented
levels of fear in the markets we are now left
to wonder, what does the average investor do now?
impossible to have a universal answer for everyone
there are a couple of items that we can focus
on going forward:
you are still in the workforce and contemplating
stopping your 401k contributions, don't. It may
be difficult to watch your account balances drop
but stopping contributions is the worst thing
you can do. If you are concerned that the markets
will drop further then make allocation changes
to your existing contributions along with directing
your new contributions toward asset classes that
are a bit less volatile.
simple reason is that the 401k still offers one
of your best tax breaks, it generally offers an
employer match (free money), and it is probably
the single largest asset that will support you
Strategy / Allocation:
markets are down approximately 40% from their
high one year ago and October was the worst month
in 21 years. Do you change your strategy now that
we have suffered through all of this?
is no right or wrong answer on this one. Obviously,
the market has priced in a fairly severe recession
and will begin to rebound long before the economy
starts to recover. I will share with you two links
from some pretty savvy investment gurus:
American, I am
are we Now?
thing to note, while each of these guys are saying
that valuations look attractive for the first
time in many years, neither is saying that this
market is going to go straight up. In fact we
may bounce through the end of the year and retest
the October lows in the first quarter of next
year when the market gets wind of dismal holiday
one take away that both of these investors is
advocating is a multi-year timeframe. (along with
the ability to ignore that day to day girations
and flip flopping bull/bear commentary on the
do you do?
will take some time to repair the damage that
has been inflicted this year in the markets. If
you remember the 2000 / 2001 decline, the markets
bounced around until 2003 before launching into
the next bull market. We may follow that path
or simply start a recovery in mid 2009, no one
knows for sure.
best course of action for the average investor
is to have enough cash on the sidelines to cushion
your portfolio against volatility and to cover
cash needs for the upcoming year. (if you don't
have any cash in your investment account consider
building some with any bounce we get) The remainder
of your long term investments can be positioned
for the eventual recovery whether it happens in
2009 or 2010.
is a challenging time for all of us, but I am
here to help. If you have a question regarding
your financial strategy, feel free to email me.