Time to quit investing?

[Kommander]

Just before the collapse of the market Kramer went on TV and said that any money that you are going to need in the next 5 years needs to be immediately withdrawn. For many retirees that meant everything. Assuming that there is not a total collapse it's a bit late to get out of the game now as the house has already burned down. Things could still get worse, but the majority of the damage has already been done.

[HTRN]

This is a short term deal.

Pulling out now, will ensure that YOU LOSE MONEY.

If you sell out now, you're paper holdings become real. The economy is going to bounce back, along with the value of the stocks. Do you think you can make your money back in 4-5 years?

Think of this another way - now is not a time of loss - it's a buying opportunity.


HTRN

[Precision]

Here is the method that people with MONEY use to get more money (former stock broker here)

Invest without passion.
Or said another way, get a good diversification strategy that takes into account your risk tolerance, then work the strategy. Not allowing short term conditions to get you off track. Excitement and fear almost always cause people to do EXACTLY the wrong thing.

How I invest for my friends and family, is in an umbrella mutual fund grouping that allows readjustments without penalties. I happen to use Morgan Stanley and work through there non-house mutual program (avoid house mutual programs like they are run by Pelosi). It is called Fund Solution if I remember correctly.

The idea is, you have a universe of about 100 or so mutual funds to chose from. What I do is divide that list by types then look to see what fits for me within the types. By types, I mean growth or value -- and by market capitalization. Then look at long term performance and tenure of the management staff (long term fund performance means nothing if they have a new manager).

So I have these categories
small cap growth
mid cap growth
large cap growth

small cap value
mid cap value
large cap value

international -make sure it is less than 10% US
real estate - Reits and such
Emerging markets - a more aggressive way to look at international
bonds
cash / cash equivalents

Then I figure the risk tolerance of the investor and work the percentages of the portfolio to match that.

example portfolio
aggressive..conservative
....18%............7%......small cap growth
....15%............8%.....mid cap growth
....12%............10% .....large cap growth

....14%............10% .....small cap value
....12%............12% .....mid cap value
....10%............15% .....large cap value

....7%............8% .....international
....0%............10% .....real estate
....7%............0% .....Emerging markets
....0%............10% .....bonds
....5%............10% .....cash / cash equivalents

Obviously this is fairly subjective, but smaller cap stocks tend to be much more volatile, as do growth stocks of all market caps. Value stocks tend to be slower moving but great performers long term. Adding all the types together makes the portfolio less risky in that they tend to move independently thus reducing the portfolio's volatility.

Once you have the plan, what I do is make quarterly adjustments to return the groups to their allotted percentage of the portfolio. What this does, is harvest gains in an area that is doing great and invest those profits in an area that is currently weak (read as likely a good value and an area for future gains). Using this simple strategy has worked VERY WELL for my family and is a fairly hands off way of investing.

Such programs also usually cost at or about 1% with no commissions or other BS fees. If you do well your broker gets paid more. If you do bad he gets paid less. A very good incentive for him to help you do well.

[Ben S]

heh. My father put $1000 into my commodities account about a year ago.
My broker called last week to tell me I have $285 left.

grrr.....Money well spent.

[drice]

I just checked my 401K and I've now lost 45%, or more than $40K since Jan 2008. I have 15-20 years before I retire, so I've left it there. I'm invested pretty much as Precision suggests: I'm in several Mutual funds across a number of categories, leaning toward higher risk, so my losses appear higher than others. As others have said, selling now will result in actual loss...so I will leave it where it is, and try not to check on it (BP alert).

I continue to contribute at 12% though, because I know every dollar I invest now is buying more shares than I could've bought 1 year ago, so when the market recovers, I will realize gains on an even higher number of shares.

[Bandito]

Check and see if your 401k plan allows for conversions or transfers to Roth IRA's.

Now is an exceptionally good time to consider getting into a Roth--the upside potential is high and the gains aren't subject to taxes.

Of course, it all depends on the individual circumstances.