Help Me Get Off the Fence

[haha]

Are you the type when entering a cold pool or oceans to do so slowly or do you just diving in and get the initial shock over with? If you can dive in a cold body of water than do the same thing with the stock market.

I am the type that just jumps in. But cold oceans and markets are not the same. As I see it, there are two reasons to be rather fully invested today. 1)Bernanke is trying as hard as his little self can try, to throw money at the country. Historically, a lot of that has wound up in equity and commodity markets; 2) The third year of a presidential term is normally strong, mainly for reason #1 above.

Arguing against this is valuation. I am more an investor than a speculator, so valuation dominates trend and I am a long way from my full "green light" equity allocation.

To Amethyst- if you need convincing, don't do it until you feel safe with no convincing.

Ha

 

[LOL!]

From today's NYTimes http://www.nytimes.com/2011/02/10/business/10STRATEGIES.html a little financial porn.

“People run to diversify risk, but generally they never do it until the market goes down,” he said. That leads them to be most risk averse at the bottom, when they should be embracing risk. They would be better off, in his view, building a broadly diversified portfolio during a period of comparative calm — now, for instance — to prepare for the next downturn and to realize that risk can only be controlled, not eliminated.

 

[easysurfer]

The jumping into the water analogy is not mine and is not a good one, IMO.

There's absolutely no difference in risk between person A, who invests a lump sum today in the market to hit their AA, and person B, who has that same AA and has been invested that way for years and chooses to keep their AA and not sell any stocks today. Yet people say that person A is taking a big risk, and person B is not. But they are in the exact same place. If the market tanks, person B is taking just as big of a hit. It's a psychological barrier. I've never heard a good explanation how person A is taking a bigger real risk than person B.

The difference, is as you mentioned the psychological barrier. The OP mentioned she's on the fence. True if after the fact, both person A and B are invested, the difference is DCA or lump sum investing, which is a different discussion.

However, how many times one never gets from point A to point B by staying on the fence...waiting for a better time. On the otherhand, other invest because it feels right, so they jump in. That's the reasoning. Those are the two extremes.

 

[haha]

From today's NYTimes http://www.nytimes.com/2011/02/10/business/10STRATEGIES.html a little financial porn.

The final quote in this article is from James Paulson, Wells Capital Management (not John Paulson)
“Most people are worried about a 2008 type of event,” Mr. Paulsen said. “They won’t avoid it, but they can lessen it. If people think they can find a diversification methodology that will prevent them from going down, they’re nuts.”

Completely true. If you were already retired during 2007-2009 breakdown, and were pretty scared, you are why God created fixed annuities and CDs. Don't forget that just because the bubble has been successfully reblown. There have been close to zero fundamental reforms, and valuations area long way from historical bargain range.

Ha

 

[Independent]

Help! I am risk averse by nature. I rolled over a government retirement account ....

I'm married to the most risk averse person I know. I worked an extra couple years so that we don't need to max out investment returns to cover our needs and (some of our) wants for life. We'll do just fine with very conservative investments.

I wonder if you're in the same category. Maybe you have a COLA'd gov't pension plus SS and they will easily cover your needs? Therefore you can afford to spend the CSRS money on "nice to haves". If so, why sweat the AA? Maybe for you, one "nice to have" is not worrying about investments.

We've got a lot in a TIPS fund. We could be even more conservative and build a TIPS ladder. Either way, we're spending some of our nest egg on sleeping easily. I suppose we could spend it on Lunesta instead, but this seems to work.

(OTOH, if I were really trying to get more aggressive, I think Kyounge's approach would work for us.)

 

[slingshot]

We "pulled the trigger" earlier this month after having transferred $$ to VG last year and leaving it sit in a MM fund for 6 months.
We still have most of the portfolio in cash, but purchased the VG minimum $3k in 6 funds to meet part of our AA.
Now we are getting our percentages up to snuff by DCA with the "new" 2011 deposits.
The rest of the cash is on reserve while we check out annuities (as we have no pensions).