The markets have been on a slippery slope in part thanks to the price of oil catapulting above its $100/barrel threshold.
This is likely to continue throughout next week and beyond as unrest in the Middle East and N. Africa is sure to draw attention. The effect will likely be that the major indexes will again be torn by bullish and bearish sentiment as fears of a consumer slowdown and a subsequent derailing of the recovery will remain a major concern.
That’s the negative. The positive is that the domestic labor markets, at least in the latest report, have given encouragement that we finally may have turned the corner.
So what’s an investor to do?
Here is reader Bill’s response:
During the last drop I lost about 30%. Recently I have recovered that plus some and just don’t see the funds I have going much higher. The replacement broker I have (for one who retired) is leery about making recommendations. So I went to cash with about $300k and am comfortable. I am looking for a time to get back in.
Bill brings up a topic I have touched on every so often but it bears repeating and that is the comfort level of the investor. While most readers prefer staying in the market until there is a reason to get out, such as a trailing sell stop being hit or a trend line crossing to the downside, there is nothing wrong with Bill’s decision.
After all, if you are not comfortable with current market conditions and don’t want any exposure at all, then that’s what you should go with. While you may miss out on some opportunities, it does not really matter.
What matters is what lets you sleep at night—and you’ll be the only one that can judge that. Don’t let anybody tell you different.
Comments 1
I am mainly an options trader, but when the market is as choppy as it is, now, I don't do much trading.
Ulli's advice is sound: "What matters is what lets you sleep at night — and you'll be the only one that can judge that. Don't let anyone tell you different." If I'm not sleeping well, at night, then whether sell stops have been hit or not, I'm "outa there."
If I intuitively feel something is not right and feel anxious, troubled, uneasy, or have other uncomfortable feelings, even if I can't put my finger on the analytical tools to back up my feelings, and it it's not right,for me, irregareless, it's not right for me to be trading.
If I have to take some lumps, to get out, it's still the right action for me to take. I need to take care of myself. The market isn't going to take care of my feelings, whether they are uncomfortable or even comfortable (because then I can get greedy and complacent). I have to do that for myself. I used to be a psychotherapist; the market can't be my psychotherapist. Life is about caring for ourselves; the people we love; and those who are less fortunate than we, to the extent we want to do this and to the extent we are able. (My advice is don't help those less fortunate, to feel magnanimous, noble, or to fulfill your unmet ego needs. In my experience, in working with others, and with me, this doesn't work and eventually comes across as patronizing to the people you supposedly are trying to help. A little bit of psychotherapy thrown into an investment blog.)