Sorry guys, I have to respectfully disagree when you say bail out of equities at this point... especially after the big hit last year.
1) First, evaluate WHEN you will need this money. If its sooner than later, no you shouldn't be heavily invested in stocks to begin with. If we are looking at at least 10 years out before you need it, stocks have historically out-performed other investments long-term, period.
2) If you do cash out now, you have insured that your losses on paper have now become permanent realized losses.
3) Don't try to time the market. When the day comes markets recover (and it will) history shows us that some of the best market gains comes literally in the first days of the recovery. Trying to time this is virtually impossible and in doing so, you have already missed some of the biggest returns.
Bottom line is, you have to find a place where you are comfortable with your money. You want to be able to sleep at night. Would I put NEW money in the market right now? That's up to the individual and their tolerance for risk.
Yes. And this is the other way of looking at it. Basically two camps going on here. And here is the problem I have with this philosophy. Normally, on a stock market dip or mild recession, you can be assured that those stocks come back because the business models are intact. Unfortunately, this is a totally different situation. We are in a place we have never been before, historically speaking. Some of these stocks simply aren't coming back. These companies are going down for good. They represent poor business models that relied too heavily on credit and rampant consumerism and the bad apples are just raining off the trees.
Take this guy in this thread. He's down 30% and yeah, the trust isn't a ton of money but he still owns a substantial portion of it. Better for him to cut his losses than wait for this hopeful "big up". Trading volume has gone way down. I'm not exactly suggesting that he try to catch a falling knife. I don't try to catch falling knives. But until jobless rates begin to fall and home values start to level off or rise, the trends will remain downward and the inevitable deflation will increase the value of his remaining money. I don't foresee the "big up" that everyone is waiting for. Too many people have already tried to catch that only to get burned once again and lose even more money. The credit industry will never be the same.
Under normal circumstances, I'd be agreeing with you 100% but nobody in finance seems to want to acknowledge that this isn't just the decade's typical run-of-the-mill recession. These are historically bad numbers with a historically bad forecast and every day the headlines read, "Dow up as investors shrug off dismal 4Q estimates". Everyone just keeps "shrugging it off". And that's exactly the way it will stay - either trade sideways or down until all the bad apples are shaken out of the tree.
At the very least, go with bonds or precious metals. I keep hearing them saying "undervalued, sale price, etc." but what value is a stock that's undervalued now but will be worthless in two years? The treasury can't play the role of a kickstand for the economy forever and 1 or even 5 trillion dollars is just not going to fix it.
I hope I am wrong, in which case I will have made no money from now until it's over but if I'm right (and the leading indicators are right) than I'll save a fortune. So I ask you. Would you rather wait this out making no money and get back in when true signs of improvement are seen or do you just hold on for dear life and pray that the markets don't continue their years long trend?
IMHO, if your downside potential is huge than it's wise to play it safe. But if downside potential is only a few hundred thousand than maybe it might be better to wait because with just a few hundred thousand what you are looking for there is appreciation obviously. But if your downside risk is much higher you need to consider asset preservation.
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