Here I am, on the way to California for a friend’s wedding celebration, picking up the nearest USA Today, and reading that the stock market took a hit of almost 400 points yesterday…boy, what timing for writing an article about investing! Actually, the timing couldn’t be better because all of us who have some excess dollars are asking the same questions:
Should we sell all of our investments and get out of the market?
And, if we sell, where do we put our investment dollars?
During 2008 the market has seen a dramatic correction and some investment professionals have told me that they are expecting another 5% downward turn between now through 2009…although with the election coming to an end and typical year end spikes…we will probably not feel that pinch until the first or second quarter of next year.
So, let’s tackle the first question …should you sell? Your answer depends upon what kinds of securities that your dollars are invested in and can you tolerate the risk associated with those investments. Last October I called my investment broker and told him that I have had enough and sold a significant portion of my portfolio and converted it to cash. I paid off some credit card debt, bought a CD and invested some dollars in a principal protection product that is tied to the S & P 500 …limiting earnings with no risk of loss. Today, I’m OK with it.
What you need to do, and now is as good of a time as any, is really analyze your portfolio to determine the winners and the losers. Because tax time is fast approaching, you may want to sell off the losers, take your losses and as for this winners …sell some of those too, so that Uncle Sam doesn’t get his fair share, as well. The word on the street is that capital gains rates are on their way up…no matter who wins the election, so selling off long term gains before year end will probably give you a short lived tax advantage.
While looking at your portfolio, don’t forget to look at your retirement dollars…for most people they represent a significant part of their invested funds and often overlook them as a part of the whole investment picture. Make sure that they work, with the rest of your portfolio dollars, to give you a balanced portfolio without too many dollars in any one sector or investment vehicle.
Although the investment arena is very scary, keep in mind that no one can time the market. As we see the financial institutions crashing around us, your stock and mutual fund investments outside of those actually invested in the institution itself, are actually not at risk. For example, if you are an investor with Lehman …and you own no actual Lehman assets or stock…your investments in other companies and bonds are OK, as long as they hold their value in the marketplace.
Using an investment professional during these turbulent times, in my mind, is an absolute must. If you are trying to handle things yourself, your are probably making a mistake, since most people do not have the understanding necessary to succeed with their investment decisions in this kind of market. So the best advice I can give you today is GET SOME HELP!