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Reassurance needed for a "Buy and Hold" investor
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mikes425
09-14-2008, 11:37 PM | Post #2561963 |
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Given the most extraordinary financial circumstances I've witnessed in my
investing life, this year...this weekend, I welcome some form of support or defense for my advisor's dogma to 'stay the course' in a "buy and hold" fund based portfolio. I ask this knowing that there are a lot of folks who are encouraged not to 'time' the market with their index-fund approach, relying on periodic - not daily or hourly - advice to rebalance and reallocate things to maintain a particular investment profile model; ("Moderate" in the case of my C. Schwab Managed Account description list).
The bottom line for me is that AUM advisors, and their firms, profit from EVERY transaction- and make their $$ whether the mkt is up, down or neutral. As recently as this past week, I questioned to my advisor, the validity of staying in an index ETF (VTI) this year when there is simply no upside on the horizon. I was advised that - given my investment timeline/horizon (at age 50) of beginning to rely on investment income starting at a hypothetical quasi-retirement age of 57-59, that i should not be timing anything because i might miss out on the upturn of a given equity by being out of the market and that - often times the biggest upward movement is rapidly on the heels of a steep decline - ok i'm paraphrasing a bit but that's the gist of her point. So i ask...is it just me, or are we experiencing unprecedented market conditions that challenge that old 'buy and hold' mentality. This has to be a fundamental question on the minds of countless middle-income-trying-to-save-their-nesteggers right about now.
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Re: Reassurance needed for a "Buy and Hold" investor
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Aalan88
09-14-2008, 11:57 PM | Post #2561964
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No reassurance here. But my answer to you is, no, it's not just you. i am also nearing retirement and scrambling every day to see what I can do to keep my precarious nest egg from melting away. The "buy and hold" advisors mean well, but their training is for long-term view and probabilities, not for the facts on the ground. Your index fund includes (or included) LEH, FNM, FRE, and all the rest. These are not coming back. And much of the rest may not come back to last year's high--let alone surpass it-- for 5, 10, or 15 years. I'm 61 now--how long can we wait? Alternatives: (1) Move everything to bonds and mixed-asset funds--and I don't mean in US dollars, either. Or (2) learn to trade and time the market. It's a little late to get out now, having lost 15-20% or so this past year, but you could pull back for a few weeks (or months) and save some "dry powder" for the upturn--if you can find one. This requires a lot of attention, hard to do if you have a full-time job in another field. Or (3) move to managed funds and hope that the managers can beat the market. Or (4) some combination of these (which is what I do). May we all act with more wisdom than the market makers have... --Aalan
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Re: Reassurance needed for a "Buy and Hold" investor
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florida
09-15-2008, 5:05 AM | Post #2561987
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Re: Reassurance needed for a "Buy and Hold" investor
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leelee
09-15-2008, 5:44 AM | Post #2561994
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I am staying in until the election. If Obama is elected, I am out of the market as I am sure, lots of others will pull out in anticipation of a cap gains hike. If McCain wins and we get a tax cut, money will come flowing back into the markets.
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Re: Reassurance needed for a "Buy and Hold" investor
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JWR1945a
09-15-2008, 10:46 AM | Post #2562108
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So i ask...is it just me, or are we experiencing unprecedented market
conditions that challenge that old 'buy and hold' mentality. This has
to be a fundamental question on the minds of countless
middle-income-trying-to-save-their-nesteggers right about now. We are experiencing common, ordinary market conditions that challenge the "buy and hold" mantra. Short term timing is difficult at best. Long term shifts in allocation according to valuations make a lot of sense. Have fun. John Walter Russell
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Re: Reassurance needed for a "Buy and Hold" investor
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pkcrafter
09-15-2008, 11:22 AM | Post #2562120
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Mike, we are experiencing what Alan Greenspan calls a once in a hundred year event. So, yes, the circumstances are different, but market reactions are the same as always in times of distress. I am already retired and I'm holding to my asset allocation. The big question concerning you is what is your asset allocation to stocks vs bonds/cash and how does it agree with your tolerance for risk. Moderate does not mean anything. What are the percentages? Also, how are you diversified? Paul
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Re: Reassurance needed for a "Buy and Hold" investor
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theDumberOne
09-15-2008, 11:57 AM | Post #2562130
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Re: Reassurance needed for a "Buy and Hold" investor
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Gaucho44
09-15-2008, 12:28 PM | Post #2562141
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As the others have mentioned, "stay the course"! No one knows where the market is going, BUT all things will eventually pass. This past year I am down about 7%, but also have a rather aggressive portfolio with dividend payments of about 2.5%....which at least eases some of the pain of the years loss. In the coming months I plan to sell some of my holdings and move to other higher dividend payors...around 4-6%...plus hopefully some reasonable growth in dividends. I am 4 years close to planning my retirement, but I continue to work!
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Re: Reassurance needed for a "Buy and Hold" investor
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Rick Hamilton
09-15-2008, 5:51 PM | Post #2562260
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Today the market had a sale, a pretty good one in fact. Every person that sold today sold to someone who will enjoy buying at a discount. I personally like sales, so I increased my position in equities, and reduced my cash some. Thankfully I'm still in the accumulation stage, and not my distribution stage. For those in the distribution stage, today was probably like a blow to the mid-section. I don't envy them at all. Hopefully they have adequate reserves so they aren't forced to sell while the market is lower. Rick
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Re: Reassurance needed for a "Buy and Hold" investor
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Vixxxx
09-16-2008, 2:41 AM | Post #2562467
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