Is it time to get out of the market?

The stock market’s lackluster performance over the past five or six years has been bad enough, but now with Treasury and interest rates creeping up, and Bush’s wild spending of money the government doesn’t have, the outlook is less than rosy. In other words, there is very little money to support the debt. Merrill Lynch and others are sending up cautionary flags, which is bound to make things even more jittery. Is it time to get out of the stock market and pile back into bonds and less risky (lower interest) investments before the housing market crashes (for one), taking the stock market with it?

I’m just barely getting into the Stock Market, because I am young and am not quite able to invest yet. However, if I had enough accumulated capital at the moment, I’d put into savings until after everything crashes. It has been a bear market for sometime now, except for the housing and a couple other markets. But, as soon as we hit the lowest lows, you can invest like mad. For me, I’m waiting it out till the next huge bull market, which should happen relatively soon.

So, that’s what I’d do, for now - low intrest stuff until we hit an upturn. Whenever that is: I’m thinking it’s going to get a whole lot worse, as seemingly nobody, either the president or Congress, has any idea how to run an economy. Not only this, but that new chairman of the FR is, well, new, and may just suck.

What kind of low interest investments to use, though, I’m not sure. Don’t bonds have atrocious rates these days? There are low-interest investments, and then there are pitiful ones. Last I saw, it was some astounding rate for a typical bond to mature, although I may be wrong.

A. The market is not a school of fish, all turning and swimming in the same direction. No matter which way the averages are going, there are stocks that do well, and some that do badly. Do your homework, diversify, and Don’t Panic. The ones who are hurt least by a crash are those who hold their ground and go bottom feeding when the dust has cleared.

B. When you have vomited in the cereal & crackers aisle and fallen down in it, it’s time to get out of the market.

I’m not getting out of the market, because right now all my investments are in an index fund inside my Roth IRA. So 1. I can’t get out and 2. I wouldn’t get out anyway because the only stuff I have is long, long-term investments.

It might be worth looking into putting cash you can’t afford to lose into bonds or CDs though.

I have no idea what the market is going to do, but I will disclose that I’m considering shorting one of the U.S. indexes to have some downside protection for my portfolio, which is showing substantial capital gains.

Having said that, I would argue that any prospective buyer of stocks should welcome lower share prices. I’d be fine with a falling market for a further reason, that being that I’m following a high-yield investment strategy, and lower share prices would make dividend yields more attractive.(Here is a piece on the importance of dividends in equity investing.)

I’d also argue that buying when there’s panic in the air can often be profitable because prices will get marked down to silly levels as people let their emotions get the better of them. For example, one of the stocks in my portfolio is Royal Dutch Shell Plc, which I bought in February 2004 at the height of the “crisis” over the company’s oil reserves. The shares were getting pounded, but I felt they were being ridiculously mispriced, and the slide had driven the dividend yield up to 4.5%, the best available in quite some time, so I was happy to shrug off the gloom and doom and buy in. The stock has since climbed about 50%, and I’ve been collecting dividend income along the way as well.

I’m looking to pull the plug in a couple of years, so I don’t have the luxury of long-term risky investing strategies. We should have about a mil in liquid assets by then, but a market crash could seriously put a dent in things. Perhaps I’m just overly nervous here, but the uncontrolled government spending and incurred debt does not make for a good outlook. With increased interest rates, we’re going to see less home and auto buying, which is bad for markets. CD and other government-backed instruments are beginning to show higher interest, which is not a good sign for the markets, either.

I don’t see any positives for the market. Government debt is going to really hurt. Productivity is not going up fast. Earnings are lack luster. highly likely that the housing market is going to at least slowly decline if not implode. Interest rates will only continue to go up. With a weak outlook for the dollar, what foreigners want to bankroll our deft and stock market? This will in turn drive up interest rates.

Looking at retirement in a few years, you should be playing safe. Chances of a bull market in next few years is slim to none. What’s your risk return benefit It would be prudent to at least cut your market holdings, and the stuff you do keep in very high quality stocks (blue blue blue chips - GE, Microsoft, etc) with good earnings, low debt and strong cash flow.

How about my 401K?

I’m got a big part of it in an overseas investment fund.

If I don’t switch it out, will I lose mt kiester.
BTW–it’s the best return on all the funds available in my 401k.

A Random Walk Down Wallstreet builds a strong case to show that you cannot predict the market - until after.

OTOH The Next Great Bubble Boom: How to Profit from the Greatest Boom in History, 2005-2009 claims that the market will hit 40,000 by 2010 and then crash in a big way.

In short, the experts don’t know - or at least they don’t agree.

Eight Steps to Seven Figures recommends that you buy and hold and hold and hold. Diversify and understand that some stocks will continue to perform well and some won’t.

I’m confused about the role of the US foreign debt. OK, China sells us cheap clothing, tools, TV set, laptop computers, etc., at prices far below what they would cost if made here. The chinese by very little from us, and stal/copy things they want (for example, piracy of software, music, movies, etc., amounts to trillions/year). So, the Chinese buy bonds, and accept a low yield. Why on earth would they then want to provoke a run on the dollar? If tat happened, the market fro chines goods in the USA would go away. So, isn’t the foreign debt thing a bit overblown?

My international investments tend to perform better than my domestic funds as well. This is usually so when the American market isn’t doing well. During the huge bull market of the 90s, international funds generally performed dismally.

How will you know that we’ve “hit the lowest lows?” You make it sound like you want to time the market, but that’s just not possible.

As for this, I don’t know what you mean that you “can’t get out” of the market. Even though your money is in a Roth IRA, you can invest it in a different fund than it’s currently invested in, or even invest in a bond fund or cash account.