Over the past several decades we've had a new generation of investors: people who put their life savings in 401Ks and pension funds. Most people are conditioned to believe that markets will keep going up over the long term and do not follow the day to day changes in the prices of their investments.
This type of attitude encourages complacency and procrastination when it comes to taking action. So what happens when a real bear market shakes the very foundation of your life's future?
Now, after selling out, the market turns up, but the fear factor is so great that most people will not jump back in and buy again, plus they don't have the capital left over to do it. So now the Dow rallies 26% and they missed the train.
Some people cashed in their IRAs and lost nearly half of their capital. Others sold to save the capital for their children's tuition. Still others need income to live and can't wait out the next rally. Many people reduced their exposure to stocks, some leaving only 10% of their portfolio in equities.
Did you reduce your stock holdings over the past year?
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Reader Comments (Page 1 of 1)
5-19-2009 @ 5:18AM
Warren said...
"Did you reduce your stock holdings over the past year?"
No way. I have a long term outlook and I won't need my retirement funds for 20+ years. It would be foolish to react to what will ultimately become a foot note in market history.
I used this bear to rebalance my 401K and to invest enough to max it out for this year at the same time.
5-18-2009 @ 5:10PM
Dodo said...
I placed like 20% of my asset last year when DOW was like 8000. Suffered a bit but held on. Put another 50% of my asset when it came back up to 8000 again. Now I have 70% of asset in Stock now. I have 30% in Savings that I can put into maybe bonds. (For now I have it at online saving at 2% interest). I'm 27, so got a long way to go. Maybe i'll get out when the DOW reaches 16,000. And put it all in CD and wait for another bottom. So I got long long term plan. I had no stocks before the downturn happen so it was pretty easy to get in. But having seen how the stocks work, I won't stay in like a Dodo.