As I'm typing this post, the Dow Jones Industrial Average is dipping right under 8500, a scary sight for any red-blooded American. Lately I've been thinking about how to talk about this without sounding like a parent scolding her children for not listening, so if that's how this comes across, I apologize.
It's just... PEOPLE. Selling everything in your 401(k) because of market insecurity is insane. IN-SANE. It's crazy for two reasons:
1) What you're doing? It's the opposite of the most basic, fundamental stock market rule. You're supposed to BUY LOW and SELL HIGH. Not freak out and sell low.
2) You'll never make your money back.
I mean it. If you take your money out of the stock market right now and then wait until it starts to go back up again before reinvesting, you WILL NOT MAKE YOUR MONEY BACK. I don't know how much clearer I can be.
Attempting to time the market is both reckless and IMPOSSIBLE. It can't be done.
Because you're going to miss the upswing. After most major stock market crashes, there are a handful of days when record returns are achieved and if you're not IN the market on those key days because you're worried about short-term losses, you'll never see those gains in your portfolio.
Fidelity (one of my favorite money managers) has this great tool that you can play with that will illustrate exactly what I'm talking about.
I'm not attempting to tell you what to do with your portfolio, but I am going to blame this entire stock market catastrophe on LACK OF PROPER FINANCIAL EDUCATION. If more people had chosen to properly diversify their assets using the basic tenants of asset allocation, this fear wouldn't be causing such a huge sell off.
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14 comments:
Can I give you an amen on this? This is making me crazy. I think an NPR commentator said it best yesterday when he said, "Until you cash out, you have only lost money on paper. Once you pull your money, you have lost is FOR REAL." Not strictly accurate, but pretty close.
I was just saying this morning that I wish I had an extra thousand or so to afford to lose, because I would actually start buying now just for kicks if I could.
GAH! Thank you.
I just wish people would sit tight and stop selling.
But - I'm still pretty liquid, so at least I can take advantage of some of the ridiculousness and get some good deals.
Seriously, I'm with you. We need to educate people on simple financial common sense. Before I ditched my pantyhose, I funded mortgage loans. I could NEVER understand how people thought it was a good idea to do interest only loans or those damn no income verification loans. Can you say STOOPID?
I agree. The only people making any money now are the short-sellers, which is why we have to hit bottom (once they all cover) before we go back up.
ALSO, why pull your money out if you're relatively young? JESUS. WHY IS THIS SO HARD. I know people who have 30 years until retirement who are FREAKING OUT. Dude. Thirty years is a long-ass time for the market to rebound.
Thanks for this!
I know people who are pulling out because they "aren't getting anything out of it now"...and I'm all "huh?"
Seriously, I'm pretty stupid about this stuff so I thought maybe I was the one missing something here.
I agree with you. I can't believe the people that would take their money out right now.
We also use Fidelity so I guess we are on the right track. :)
Can I ask you something about CD's. I would like to buy one, however I know nothing about them other than you are letting someone else use your money for a fixed amount of time. But if a bank is offering say 3.2% or a 3.25 APR. waht does that mean? I know I may sound like a dummy here, but I really don't know. Could you write about that?
Yes! My husband and I were talking the other night about how we wish we had more to put in the stock market now, because we're young enough to risk it for the possibility of cashing in later. Alas, though we can't scrape up any moer than we have.
Then I went to work the next day, and my 30 year old co-worker was almost crying because she was comtemplating pulling all er money out because she'd lost so much. She has literal years before it's going to affect her.
So what do I tell my 62 year old mother concerning her 401(k)? I know I have plenty of time in the market so I'm not worried about it, but what about those folks nearing retirement?
Honestly? 62 is REALLY early to retire in this economy. We all have to start thinking about working until we are no longer physically or mentally capable. It's always been my OWN plan to work until I'm around 75. Of course, I enjoy my work and it's not physical, but as a whole Americans tend to set unrealistic expectations about retirement. Even continuing to work part time can give your assets time to work longer for you.
And we should all take this market crash as a way to learn about diversification, about not investing money we can't lose! By the time a person is that close to retirement, I don't want to see more than 50% of their asset allocation in stocks!
I intend to retire at 62, work on things I enjoy and still maintain a source of income due to that enjoyment. It is not too early.
Secondly I share this link and hope that you will PLEASE STOP feeding your kids pop tarts, even organic pop tarts suck for nutrtion. And this is far cheaper. Save your money so you can retire before your dead 2 days later.
http://jengrantmorris.blogspot.com/2008/10/all-about-pancakes.html
62 might not be too early, I think it depends on how much money you save!
And Kristy, I fee my kids ICE CREAM too and it sure as hell ain't for the NUTRITION.
My thoughts exactly. NYT just had an article encouraging people to invest now.
@mandajuice LOL, love your response to Kristy.
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