For those of you who have temporarily taken a big hit to your retirement account, PLEASE don’t sell right now! I know that this goes against every human instinct you may be feeling at the moment, but you simply CANNOT sell at a loss.
Contrary to popular belief, Wall Street is full of liberals who love government intervention when it benefits them. After some form of the bailout is implemented, we WILL SEE A RALLY in the markets.
Luckily, I sold all of my stocks a month ago...the market was just too difficult.
If I still had money in the market now and was sitting on a 25% loss, I’d wait for a short-term rally following the bailout package. I actually believe folks will recoup much of their investment, if not all of it, after the package is implemented. HOWEVER, I believe this rally will be short-lived. If it were me, I’d sell into strength on the rally and begin increasing my cash position. I’d even stay out of bonds for a while. Things are too uncertain at the moment.
Cash is king for the next couple of years...at the moment, capital preservation is more important than going for gains. Again, wait for the impending rally and sell into strength…if you end up being down 5% for the year, consider yourself lucky.
This strategy does not apply to investments in tax-incentive instruments (ex. Roth or Traditional IRA)...I'd leave these alone.
FMC
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