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How do I determine when I should start buying stocks and bonds again?

I shifted all my retirement funds into money markets after the stock market started to fall in 2008

Jan 10, 2012 by Arjun from Homewood, PA in  |  Flag
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Arjun,

You just asked the most unanswerable question ever! (LOL) The time to get "back in" the market was March 2009. Of course, we have the benefit of looking backwards here but for most people it was way to scary to get back in when the Dow was flirting around 6,000 or so. As you have probably noticed markets tend to go up almost as quickly as they go down. So since getting out is easy and getting back in is very difficult and no one has ever been able to consistently time the market, what is one to do. The problem being hat if one got out of the market when the Dow was around 8,000 and got back in a 12,000 that person sold low and bought high. We want to do the opposite!

First, you may want to consider goal oriented investing, being a more conservative investor, using target date funds. For my conservative clients we sometimes will have a "sell trigger" if their account drops by a certain percentage. While not perfect, it is better to get out at a 15% loss than a 40% loss. Again, when do we get back in is the difficult part.

Another strategy would be to rebalance account from time to time. If you are comfortable with a 50-50 stock bond mix and your stock portion goes up to 70% you would sell 20% of your stock portion and buy more bonds. Often this helps people sell high and buy low.

One last thing to consider, Arjun is that in 1945 the S&P 500 was valued about 15 today it's 1,347. When you do math, consider that gain does not include any dividends!

Comment   |  Flag   |  Feb 08, 2012 from Cleveland, OH

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Barry Rabinowitz Level 19

Hi: I am sorry to hear that. NOBODY can time the market. Please read my guide: MarketTiming. Based on your risk tolerance- you set an asset allocation and stick to it. Rebalanceonce a year. Use low cost ETF or no load funds for asset allocation.

1 Comment   |  Flag   |  Jan 11, 2012 from Fort Lauderdale, FL
Ryan

Just for reference, here is a link to Barry's guide on market timing: http://www.brightscope.com/financial-planning/advice/guide/1090/Market-Timing/

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Flag |  Feb 08, 2012 near San Diego, CA

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David Kleinik Level 15

Arjun,

Unfortunately you can not time the market but you can have more time in the market. Meaning GET BACK IN. 1. This time approach it with more knowledge call the 401k provider at your job to get him to sit down with you (it should be free you already pay for his services) 2. If S/hes no help see if your company has target date funds I.E. I plan to retire by 2020 Pick a Target date 2020 And Whatever you decision in investing you decide, stick with it and don't be afraid to call the advisor before any adjustment's (that's what you pay him for)

Good Luck, David Kleinik

Comment   |  Flag   |  Jan 31, 2012 from Jacksonville, FL

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