Friday, October 10, 2008

Weathering the Storm

In discussion of today's market events with my roommates, one of them stated that he moved all of his 401(k) from stocks into a money-market fund. I understand moving some money, but ALL? Especially when you are in your early 20s and have many years to reap the benefits back, and then some? (To be honest, I thought my very intelligent roommate had more sense than that.)

Like so many people, my roommate is an emotional investor. However, when you have time on your side, you should try as hard as possible to NOT let your emotions lead you. To the best of your ability.

As this article from the NYTimes so aptly states, it is not a good idea to try to be a market timer. Which is exactly what my 24-year-old roommate is trying to do. He said he would just switch his money back into stocks when they start to go up again - but, it is very difficult to realized when that will be. If he could accurately do that, he would have moved his money a year ago. What if stocks post huge gains tomorrow?

I am just starting to invest. I realize that, yes, I will lose value initially. The markets do not go up forever, they do tumble, and sometimes by a lot. However, they also post amazing gains and, in the long-run, have always provided wonderful returns.

1 comments:

graduatedlearning October 11, 2008 at 11:23 PM  

wow...
I'm trying not to be an emotional investor, though I did see my 401(k) drop 25%...

But yeah, I'm weathering the storm...it seems foolish to sell your stocks right now, as you're likely losing money. But I guess if your stocks go to 0, it will be even worse.
I'm banking on the fact that I'm not retiring any time soon. Hopefully by the time I retire, the market has recovered!

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