I knew I shouldn’t have turned on CNN in the hotel. I go away for a week and it’s 1997 again!
I don’t feel like posting any more articles from the “buy-and-holders“, although I remain one. So how about some commentary from John Hussman, whose fund HSGFX is actually even for the year down “only” 15% YTD. I don’t own this fund and am not saying he’s always right, but I think he does a good job of laying out the reasons for his conclusions.
His November 17th weekly commentary is long, but worth the read. Some excerpts:
Our activity as investors is not to try to identify tops and bottoms – it is to constantly align our exposure to risk in proportion to the return that we can expect from that risk, given prevailing evidence.
As for extreme and less likely benchmarks, the 780 level on the S&P 500 would represent a 50% loss from the market’s peak, and would put the market in the lowest 20% of all historical valuations. I would expect heavy demand from value-conscious investors about that level if the market were to decline further, and a decline below that level could be expected to reverse back toward 780 fairly quickly. Further down, but very unlikely at this point from my perspective, the 700 level on the S&P 500 would represent the lowest 10% of historical valuations, 625 would put the market in the lowest 5% of valuations, and anywhere at 600 or below would put the market in the lowest 1% of historical valuations. I don’t expect to see such a level, but there it is. Note that these estimates are unaffected by how low earnings might go next quarter or next year. Stocks are not a claim on next quarter’s or next year’s earnings – they are a claim on an indefinite stream of future cash flows.
As a side note, do your best to filter out comments like “investors are moving out of stocks and into …” or “investors are selling into this decline” or “investors are buying into this rally.” On balance, investors do not sell shares, and they don’t buy shares. Every share purchased is a share sold. The only question is what price movement is required to prompt a buyer and a seller to trade with each other. No money will come off the sidelines into stocks. No money will come out of stocks and onto the sidelines. All such talk is non-equilibrium idiocy. Keep in mind that the “market” consists of different traders with a variety of time-horizons, risk-tolerances, and analytical methods (e.g. technical, report-driven, value-conscious). It is helpful to think in terms of which group of individuals is likely to do what, and when. It is equally important to know which group of investors you belong to. As the old saying goes, if you’re at a poker table and you don’t know who the patsy is, you’re the patsy.
Here’s my attempt at a quick summary: While the present looks bleak, the potential for future returns is looking brighter and brighter for long-term investors. The opposite was true a few years ago. If you’re young and still putting money away, this is a good thing! (Although adequate emergency funds should be your first goal.)
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I think as share prices get lower and lower, it becomes a better opportunity to buy low, especially for the long term investor. I would wait for a bit more stability in the marketplace, but overall, now is a good time to buy!
what Matt said.
I agree with you guys. However, EPS estimates, and therefore valuations, are ridiculously high.
Roubini from a few weeks ago and I think he hits the nail on the head, “For 2009 the consensus estimates for earnings are delusional: current consensus estimates are that S&P 500 earnings per share (EPS) will be $90 in 2009 up 15% from 2008. Such estimates are outright silly and delusional. If EPS fall – as most likely – to a level of $60 then with a multiple (P/E ratio) of 12 the S&P500 index could fall to 720, i.e. 20% below current levels; if the P/E falls to 10 – as possible in a severe recession, the S&P could be down to 600 or 35% below current levels. And in a very severe recession one cannot exclude that the EPS could fall as low as $50 in 2009 dragging the S&P500 index to as low as 500. So, even based on fundamentals and valuations, there are significant downside risks to U.S. equities.”
So I hope it turns around, but I see very little fundamental or technical reasons why it would. Best of luck.
Now is an opportunity to invest. I would nibble away now and hold for two decades.
This is the first time the US has entered an event like this with an economy based on 70% consumerism. I don’t see this point talked about by any experts. What happens to an economy like that when consumption drops too far? How do you get it back?
Putting money into a market that represents the old model right now seems like pure folly.
Honestly Jonathan, you do a disservice to your readers by constantly pushing the buy-and-hold model over other methods of looking at the markets. I think you’re biased towards buy-and-hold as that’s what has worked in the past 25 years for the lazy investor. But then you don’t look at other underlying economic reasons might might lead to the same results. (For instance, past 25 years had development of 401ks and IRAs – so more investors, stable interest rates after 1982, and continued growth of credit – increased leverage)
Buy-and-hold is a reversion to the mean model. With the idea that on average, equity will grow on the long-term. I remember a trader saying, reversion to the mean is great, it works 95% of the time. But the other 5% it blows up. LTCM, AIG, and other groups used the same style for their businesses (albeit more highly leveraged), and we know what happened to them. The 5% will happen eventually, and sticking ones head in the sand to such possibilities is poor risk management, and leaves one exposed to deep losses.
I was a buy-and-hold investor until 2007, when I saw the light, noticed that the market was highly manipulated, and that the American economy (and the world’s) was living in fantasyland. I’m all cash since then, didn’t lose one dime, and am getting a 9% return for the last 3 years. Not too sexy of a return or investments, but I’m not losing my shirt like many “experts” either. I also sold my home at bubble’s peak, took the socialist tax break, and am renting since then, just waiting for the market to go even lower to buy another home for peanuts and take the other socialist tax credit of $7,400. Haven’t taken fed taxes out of paycheck for the entire year, to offset it with the tax credit during filling time in 2009. Since going all cash, I’ve opened a brokerage account at my Vanguard IRA, so I can trade ETFs from now on. Buy-and-hold is dead, and you need to be active to avoid losing your retirement. The proof is that I did the right thing by pulling all my money out of mutual funds, which were filled with GMs, bankrupt financials, and other rotten stocks disguised as “good buy”. Check the holdings on your mutual funds to see how much exposure to rotten stuff, which will never break even for the next 30 years or more, if ever. I think it’s funny that many of you are down 50% and think that you will break even in a few years, or justify by saying “I’m for the long term”. Sure, even if the long term takes 30 years, with inflation and fees eating it in the meantime? Got it. Oh, and don’t even get me started on foolish emerging market bets. My point is that you’re stuck with rotten stocks when you buy and hold mutual funds, with nowhere to run. Another thing you forgot: when stocks like Citi go below $5, mutual funds have to sell it; so much for “buy-and-hold”. Also, most of the dividends being advertised are based on fantasy (again), just like the EPS, because companies will be cutting them a lot to survive. So no, the S&P isn’t cheap to buy and buy-and-hold is really dead. Ask the Japanese who were buying and holding since the 90s. Check the Nikkei since then. Oh, it just happens to others, right? Right?
Its funny how everybody was laughing at Jim Cramer when he went on national T.V. and instructed the American public to SELL EVERYTHING. Look who’s laughing now?
People have very short term memories. The buy-and-hold crowd have based their opinions on statistics from market activity over the last 50 years or so. They forget that civilization has existed for thousands of years, and throughout history, there have been bubbles of many kinds (some of which last hundreds of years) that inevitably crash and burn.
The only asset that has managed to stand the test of time is gold. Even land (private property) can be confiscated in times of political unrest or even war.
Like earthquakes in California, everybody is hoping and praying that this financial crisis isn’t going to be the big one. If it is, then everyone will finally understand why the founding fathers insisted on our right to bear arms.
what enzo said. and what joelkton said. this time really is different. we are just getting started folks.
it hath been foretold.
That is so foolish Enzo!!!
How can you say that because you identified a peak then everyone else should do the same? Do you want to do the math and count how many people missed the peak and for that matter will miss the bottom? Market timing is NOT a winning strategy… there is a TON of research about this. Today’s ouperformers will be tomorrows laggers and laggers that survive today will be tomorrows outperformers. The only caveat is that you can’t know who outperforms/laggs before hand!
I am very glad for you, if you cashed at the right point (if you truly did), you are one of the lucky ones. And yes, we have to call it luck not skill because anything could have happened. With the benefit of hindsight we know now that the market tanked but it was not a given at that time. Anyway, what I am trying to say is that market timing as an investment strategy works for a lucky few, but not for most of the crowd. Therefore, unless you want to test your luck every time, you are better off buying and holding for the long run.
Just my 2 cents!
I agree strongly with others posting above. This blog, while it provides a good read generally, is borderline reckless with its supposed “conservative” investing bias. What was conservative is now foolhardy.
If you want to know where EPS -could- go, look at the relative scale of the credit bubble preceding the crash. Housing is a perfect example… house price increases had outstripped wage increases by three to -four- standard deviations.. right there we’re talking an unsustainable rise in the 99.99th percentile. Credit in other markets and industries was similarly (or even moreso) overexpanded. Outstanding derivative contracts, not all offsetting, amount to ~1.4 QUADRILLION dollars, on underlying assets less than 1% of that. If even a few counterparties on the offsetting transactions can’t pay in the event of default, the wipeout will be disastrous. Even a reversion to the mean in terms of credit vs. GDP will be a 4-sigma event. Forget about overshoot to the downside, given that it’s a crash.
People buying stocks now, even buy’n’holders, are trying to catch the “bottom” in a market that may not make one for years. Few people are alive who remember the last serious unwinding of credit. Seek them out, and ask their opinions. Very few of them will have been of trading age at the time.. luckily we also have historical records.
On average, those who bought in the first two years of the crash were still underwater after 10 years. Those who bought in the third year or later were above where they started after 10 years.
Why try to make the exact bottom?? Why NOT hold out until the fundamentals of the economy are back on a solid footing? It may take 10 years or MORE. But WHY try to catch it here? It’s reckless gambling, not sound investing. You won’t miss the opportunity of a lifetime. Stocks won’t go up forever without you.
Jonathan, it is prudent at this point to remain out of the market with anything but play money. EPS estimates for 2009 may be delusional, and it may not be… but there is NO evidence to the positive, and much to the negative. Your advice has always been conservative, and now is no time to change that. It happens that what you used to do as conservative is now the riskiest play of all. The conservative advice at this point would be to take money out of the market, despite any losses to date, move 401k’s etc. into short-term government debt (federal level only), own a small amount of gold as a hedge against currency risk, and ride out the storm. You don’t hoist the topsail in a hurricane. You batton down, steer true, and hope you’re still upright in the morning.
Diehard buy and holders might be well-advised to take a look at Nikkei charts. Nikkei is currently sitting at just under 8000. Down from it’s all-time high of almost 40,000. In 1990.
Are we headed for the same? I honestly don’t know, but I fear that we are. If we’re at the start of a 20 or 25 year secular bear market, the conventional wisdom (which mostly came about during a historical secular bull market) might need to fly out the window. Anyone who says that “it can’t happen” or that stocks “always go up” is mistaken.
Yes, Japan had a real estate bubble and their index has had a horrible time for 2 decades, but we aren’t really Japan, are we? We have a lot of room for growth — Japan is a small country, with only so much room to grow. They have never grown at the rate of the U.S. — maybe their markets used to, through all their specialized management of resources — but there are so many variables that separate their economy from ours. I really don’t know where we are headed, but I think of the U.S. as leading everything else. It is just a coincidence that our markets have fallen too — markets have always fallen. And how can markets expect year over year, profit growth in percentage? That’s crazy in the first place. If your business grew 2% last year, and it keeps growing at 2%, you should be quite happy, and your shareholders. Expectations of double digit growth every year is what has killed this market. Normal expectations would lead to a normal market.
Imtos,
I agree that timing the market is a bad proposition. However, I don’t consider what I did “timing the market”, but paying attention to fundamentals and not following the herd, or as some might say, “drink the Kool-Aid” from snake-oil salesmen posing as book authors and “experts” in the media. Did you really believe that the housing market could go up forever the way it was? What about all the alarming charts indicating that the highly leveraged homeowner was in big trouble? I knew people who were earning $40k per year and getting mortgages for a couple $800k McMansions. Can’t you identify a bubble that huge right in front of you? Is that “timing the market”? There were several blogs telling in advance that it’s going to be ugly. Peter Schiff, Noubini, Jim Rogers, etc, were saying that it was going to blow. Most people didn’t care. How anyone can still keep on doing “dollar-cost average”, faithfully, for the last three years or bought homes in 2005 is beyond me. Talk about catching falling knives! I don’t believe that I’m able to pick bottoms, but I rather be 5% late or early than 60% down. My strategy was never about timing the market, but have more control on what and when I was buying. I looked at my Vanguard Mutual-Funds in 2007 and saw a bunch of sectors I really didn’t want to own during a financial crisis. Have you noticed that nobody is asking financials how they plan to make money in the future, now that the CDO party is over and the American consumer is broke? Nevertheless, lots of people still have those stocks in their portfolios, doing dollar-cost-average every month to buy more of them. The commercial real state shoe didn’t even drop yet, but I see many people still buying REITS, every month. Today the market rallied 500 points in the last hour and everyone thinks is totally acceptable and normal. Pundits have been calling bottoms every week for the last year, but I don’t plan to call a bottom just because Obama picked the next Treasury Secretary. And I don’t plan to become a day-trader or trade my ETFs everyday either. Regarding stocks like GM, my Corporate Finance professor, at my B-School, was calling it a dog already back in 2002, while we’re checking its rotten Balance Sheet as class exercise. Now everyone is “surprised” that GM is dead. I guess my prof was also “timing the market” then. Want an easy way to identify historic financial crisis way in advance? Just read the book, “Manias, Panics, and Crashes”. Oh, S&P will hit 600; you heard it here first.;)
Today I find many things I would like to buy for the long term. What the next year or 2 holds I don’t know. Even the general buy and hold strategy is not necessarily quite that simple. Warren Buffett is a good example of this strategy but when we can’t find things at good prices he waits until he can. Buy (when things are cheap) and hold until someone will pay way more that it is worth (he also sells some stocks sometimes).
I have more trouble not buying when I should wait for better bargains than he seems to.
Market timing doesn’t have to be a precise science in order to benefit the investor. In fact, there is an argument to be made that over or under-anticipating peaks and bottoms by a fairly wide margin can put one in abetter position than buy-and-hold.
Richard Shaw of QVM Group writes:”Let’s assume for the moment that the market goes down 50% in year one and then goes up 75% in year two. That means $100 goes down to $50 and then up to $87.50.
If the investor got out late after 1/2 of the crash, the cash position would be $75. If the investor then got in late after 2/3 of the recovery, the final net worth would be $93.75 — better than staying fully invested.
As of Oct 24, our $100 beginning Jan 1, 2008 is now $92.53. We have conserved about $32 so far by standing aside. If this is the bottom and if somehow the market rises all the way back to its prior peak (a 67% rise) AND if we miss 2/3 of that rise by somehow being reluctant to get back in, we would still end up with over $112 — a net gain. We hope we are clever enough to get back in before 2/3 of the recovery takes place, but think we have room to be conservative.”
By this reasoning, conservative market timing isn’t simply gambling; it’s a careful application of market information to protect against extreme market conditions.
Enzo reminds me of those crazies who stocked up on guns in the 90s, waiting for the black UN helicopters to come and take over America, and later the crazies who stocked up on batteries and canned goods in 1999, waiting for the Y2K bug to plunge the civilized world into the 19th century, or the crazies in the early 00s, buying up duct tape, gas masks, and canned goods for when the evildoers attack with dirty bombs.
Enzo, I weep for you.
It is equally irresponsible to to say that nothing is changed as it is to say that everything has changed.
Clearly the era of low inflation, low volatility and easy, ever-expanding credit is over. On the other hand, that does not make us into early 90’s Japan. For one thing, we generally ‘fess up, tear down and rebuild failing institutions faster (here’s hoping for some Chap 11 action in Detroit..) US GDP will probably be net stagnant over the next 2-5 years, but world Gdp will still be growing
It could be a dangerous era for buy and hold if you’re not properly diversified. Everyone is going to have to accept higher risk or lower returns. Expect volatility.
As for the numbers, I am encouraged to see Hussman is right in line with my own estimates. We won’t drop under 625 unless the government completely fails to pass any new fiscal stimulus (hint: they’re good at spending). Things will look bleak over the next 12 months but as a young saver I really couldn’t be more thrilled
Thanks for a sensible post. There are so many people out there who talk of the world ending or some gigantic economic collapse. It’s good that there are logical people out there.
Well, Friday’s rally may have impacted this stat a bit, but as of the close on Thursday, for the first time in a VERY long time, the returns on holding US treasuries for the last 30 years exceeded the returns on the S&P 500. This is a massive slap in the face to the buy and hold theory. Interestingly, Roubini is Dr. Doom, but gladly volunteers that he is 100% in stocks right now!
Long term holding is great when it comes to dealing with normal market fluctuation. However, this has been an obvious downturn and it doesn’t look like the market will bottom any time soon. Why not just sell your position and then wait until the market truly recovers? You really have very little to lose and much to gain by doing so.
1) We aren’t like Warren Buffet with a huge bank balance affording us the liberty of making bets and taking losses for significant periods of time. Just look at his recent investments… can everyone stomach those kind of losses?
2) JAPAN!!! Yes, that is a perfect example of a highly developed country with a solid manufacturing sector, and yet the stock market has been going nowhere in the past 19 years. Two decades of low growth, deflation, and all this in a culture that actually values saving money. I remember when 1990 happened to Japan, they had a nice cushion of savings that they used to create a softer landing. American markets are in deep deep sh*t and as the financial industry has its head handed back to it by the market, you can definitely kiss the days of credit binging and transfer of wealth from the future into the present goodbye. It will take time for America to move back into core production-activities, instead of “paper-pushing” banking and similar wizard-like activities that were profitable.
3) Buy and hold at your own risk now. Some sectors will never recover. Period. Don’t get me wrong, buy and hold is very safe as long as you have a long long time frame. It must not be your only strategy though. Diversify, and that means not just the stocks/assets you own, but also diversify the strategies you use to make money. If you strongly believe in buy-and-hold, then use that for 70% of your money. Figure out alternative strategies to use for the others, and rebalance along the way.
The stock market is not really a place where people invest money. It’s a casino where you can’t even figure out the odds against winning. In an honest casino they tell you what the odds are, they don’t hide anything. But can you say the same thing for the stock market?
Looking for the S&P 500 index to fall to about 600 this coming year (2009), currently 800. So another 20% decline and total decline from 2007 highs of 70%.
This bear market will last 3-12 years!
Personally after reading most of the comments I think we just might be at the bottom. When you see 90% of the people saying we are going lower that’s when it doesn’t happen (it’s just like betting MNF whatever the public likes go the other way). I didn’t think we were near the bottom until this week as before then most weren’t so scared.
Warren Buffett doesn’t seem to think it is so incredibly foolish to be in US equities right now. Sure, he can make mistakes, but I don’t think anyone reading this has the right to call him a fool…
Also, just out of curiosity, how is Jonathan being “reckless” or “doing a disservice to readers”? It’s a blog, a place for the writer to post his OPINIONS. Hopefully we are all responsible for making our own choices.
@John: “The only asset that has managed to stand the test of time is gold. Even land (private property) can be confiscated in times of political unrest or even war.”
Gold can be confiscated too. As it was in 1933. Now, I don’t believe it’ll be as we aren’t on gold standard now, but since you are bringing up political unrest or war, remembering gold confiscation in 1933 isn’t so far fetched.
@Mark “Personally after reading most of the comments I think we just might be at the bottom. ”
I think you are onto something. In 1999 everyone thought Dow will go to 2000. In pre-crash 1929, shoe shine boys were giving out stock tips. In 1999 there was talk about “new economy” and how the situation was entirely new and stocks can go up and up without companies making any money.
@Jerad (about Buffett): I am thinking along the same lines. Buffett never claimed he could predict where the market would be in a year. But he thinks we’ll be higher in 5 years. In 1979 when the economy was terrible, he was buying. Ditto in 1993. In 1999 he warned about Cinderella staying at a ball for too long and being left with pumpkin and mice. In 2004 he mentioned publicly how he finds it more and more difficult to find any values in the market. He also was right in warning about dangers of derivatives. While he didn’t sell stocks in BRK (not sure if it was even feasible given its size and the panic this would’ve caused) and did make some mistakes on holding to insurers, he did move his personal accounts into bonds last year. Certainly he was wrong about tops and bottoms – 2004 wasn’t the top. But anybody who bought in 1979 and 1993 and sold in 1999 and 2004 would’ve been ahead. Maybe he is wrong now. Maybe not. But all this doom and gloom makes me think there could be some opportunities there, at least in some stocks.
I don’t know if EPS estimates are so high as some posters above claimed. We’ve seen a number of companies beating estimates. Also, it seems market doesn’t believe in estimates, since even when companies like HP or IBM or DOW Chemical beat estimates and confirm estimates for the year, their stocks still go down because Wall Street doesn’t care. There are stocks out there whose drop had nothing to do with fundamentals, only with panic which may indeed mean we are close to the bottom. It seems that a lot of expectation of not meeting estimates seems to be priced in. We’ll see. I have about 40-50% in cash, so I may buy a little at a time while still keeping over 100K outside of 401K in cash/CDs for “emergencies”. Only time will tell who is really right.
I am amused by some of the posts claiming buy and hold is ineffective. Sure, one can think they can time the market but that is shear ignorance.
If we can all agree that Benjamin Graham was a relativity wise investor along w/ his disciples (including some guy name Buffet), then we should listen to what they have said.
– Investors should not try to time the market, as the stock market movement is always unpredictable
– Our favorite holding period is forever
So, I take from this to choose your stocks/mutual funds/bonds with some reason behind them while looking long term, ignore the constant information about the market. Sure some info is good but it’s safe to say everyone seems to either be overly scared/optimistic within a cple years of each other.
My $0.02.
My positions…
1. Im under 30, that which is invested I am leaving sit – already had the loss, will see where it goes over time – no need to make a crazy decision right now.
2. Im making small investments in my 401K, not what I normally would, but making a side-bet that there will be growth over where we are now.
3. Im keeping a lot more cash than normal, getting small returns, but it isnt losing, so Ill take what I can get.
4. Im also playing with a very small amount of cash – buying individual stocks and selling them using Zecco, ETrade, etc. Small gains in their values mean the potential to capture a few short term gains to offset my other losses. So far, Im beating the market and every other investment I have.
5. Im saving a bit more of my take home pay than normal – I have set personal goals for the next few years, and will continue to save all of my raises, etc to help make them. It cuts on my standard of living, but most Americans are living outside their means, so making a few cuts shouldnt hurt me too much. I think I can live with one less meal out a month.
So Im widely diversified, gaining ground in some places while losing in others, and saving more to help meet the goals I have set. If the bottom drops out and all hell breaks lose, then I will buy a gun and lot of bullets and start hunting for my food and protecting my house. I dont think we are headed back to caves, but who knows.
Enzo,
I agree with you that fundamentals are “key.” However, there are two things that I don’t agree with in your reasoning:
1. Your arguments are based on the benefit of hindsight. In other words, you are looking at things on an ex-post basis. By acerting that your proposition is true because thigs happened that way is flawed. The argument I make here is not an easy one, and many people might have issues with it, but what I am trying to say is that when you made your decison (to pull out of the market in Dec 2007), you could not have been certain that the market was going to tank. What brought you to your actions was that your own assesment of the probability of a downfall was far greater than that of continous growth. However, at that time you no one “knew” what was going to happen. There was a chance (at that time), that the market would have self corrected, or a new revolutionary discovery was announced, or many other things could have happened that would have changed the final outcome. Albeit, it did not occur and the market tanked, therefore that gives YOU (and many others) that the “smart” decison was made. What if you had looked at fundamentals in 1997 and thought that everything was irrational? Many people observed an overvalued market at that time and pulled out, however, the marked proved other wise and continued to grow. All I am trying to say is that every invest/not invest decision is based on a distribution of probabilities, therefore some will be winners and some will be lossers. However, its impossible to determine before hand who is who. That is why a buy and hold strategy is better than a market timing one.
In your GM example, just think what would have happened if in 2003 GM developed a new car that revolutionized the market. I am not an auto industry expert, so maybe the possibility was there (probably not), but what if it was and what if they had done it. In that counter factuak world, GM’s share might by worth 100 times what they are worth today. Who knows (not me)? All I am saying, is that after the fact, things look a lot more clearer than what they actually are.
Anyway, all I am saying is that any thing can happen and many times investors will assign wrong probabilities to events. Therefore, missjudging peaks and valleys. Unfortunatedly, there is not a single person able to do so. Not even TERRY, with his forecast… post like that make me very sad, it is kind of calling the face of a die before rolling it, there is a chance that you choice will be the favored one, however, there is not way of knowing (even more interesting is the fact that everyones that there is 1/6 probability of being right, but in the stock market we don’t know anything about probabilities, ie there are not 6 faces to a market (like they are to a die). Just funny and sad!
2. I forgot what # 2 was but I will think about it and post it later. 😉
now it is a good time to buy stock. the market has never been as cheap as it is now.
do not follow the herd and put your money under the mattress.
no one can tell the future and thus no one can time the market.
case in point… I bought ETFC at 0.92 a share yesterday. Sold at 1.15 today.
there are deals to be had.
and sure, i will pay taxes on it, but i would rather pay taxes on actual income than no taxes on a 30-60% paper loss.
The difficulty I am finding is not when to buy new positions, but WHAT to buy. Should I be buying stocks, corporate or junk bonds, preferred stock, ETFs, indexes? There is just so much goodies that I’m finding it hard to calculate which one would yield the best upside reward and return.
Agree, you can’t preach that you should pull out and go all cash when you just happened to be in the right place at the right time. Perhaps there was some skill involved, but I would say this is the exception and not the rule. For young investors, I think this downturn could be an excellent opportunity to purchase solid companies at a discount. I recommend using some of the strategies in The Intelligent Investor and doing some stock searches.