Monday, October 06, 2008

Is today a good day to get out of stocks?

Unfortunately there's no good answer to this question. At panicked times like this it is likely that (1) if you stay in stocks, the market will keep falling and you will lose more money; yet (2) if you cash out of stocks, the market will quickly turn around and have a short-term rally, and you'll be kicking yourself mercilessly. This is not evil karma, but is actually how the market works. It's why I've spent so much time in cash recently.

The best days to get out of stocks are the days when NOBODY is panicking, like May 21 (Dow 12,601) and August 19 (Dow 11,348) - two times when I went even further and bought or held an inverse/bear fund.

Please understand I am not trying to rub anyone's noses in anything. There are many market refugees checking in today, so it's a logical opportunity for me to explain to some new visitors how things work.

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