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What's an Investor to Do Now?

Posted Oct 06, 2008 11:20am EDT by Aaron Task in Investing

With financial markets in distress and the Dow tumbling below 10,000 for the first time in four years it's tempting to put your head in the sand -- or all your money under a mattress.

Rather than refusing to look at your statement, use this moment of fear and loathing of all things financial to your advantage:

  • Review your portfolio and see if you're really diversified across all asset types and global markets, as well as cold, hard cash. Not much is working now but diversification is one thing you can control.
  • Make sure your portfolio fits your time horizon. If you have 20 or more years before retirement, history suggests you will benefit from purchases made during the current market duress. (And I'm talking about long-term investing via a 401(k) or similar retirement program, not a short-term trade, which may or may not pan out in the next week.)
  • Know your risk profile. If you can't stomach the drama, maybe you're really not an "aggressive investor" after all.

Such advice may seem obvious to more sophisticated market players -- many of whom were anxious to "buy the dip" this morning, at least before the open. But with emotions running high, it's worth remembering what long-term investing is really all about.

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673 Comments

- Monday October 06, 2008 11:24AM EDT

Buy cammo paint, guns and ammo

- Monday October 06, 2008 11:25AM EDT

buy .....Ball...ther be a run on Mason & Ball fruit jars now..... rats don't eat glass.

- Monday October 06, 2008 11:29AM EDT

The answer now is to review the market; and see what to ditch. You may not realize what you can do to make money in this market. Plan to go toward chemicals, solar, and some energy.

- Monday October 06, 2008 11:33AM EDT

Draw your own line in the sand and entrench there.

- Monday October 06, 2008 11:38AM EDT

I am going to wait for the "dead-cat-flop" we should see in the next 10 or 20 days from the Bailout. Then I'm moving to more international stocks and some high yield bonds. Get me back to 11,000 ot 11,500, then I'll lock in some losses and move.

- Monday October 06, 2008 11:38AM EDT

ANTIQUES ROADSHOW BABY!!!

- Monday October 06, 2008 11:39AM EDT

Good thing they passed the Trillion Dollar Bailout! Oh, wait, Ummmm ... that did not help did it??? Did anyone really expect it to? It's like throwing a pebble in a lake. Government can't buy us out of this one. Why??? Because they spent 55 Trillion dollars so far bailing us out of other problems. No more money left to borrow with a 55 Trillion dollar debt. I guess after we pay that back over the next 50 years we can start over again. Oh wait, ummm ... maybe we can start building products again? There is an idea! Oh yeah, while we are at it, maybe we can start using our own fuel to do it! Like Coal and Nuclear instead of send an additional 700 Billion overseas every year to buy oil. Hmmm ... think it is time to maybe elect people that get it. This mess is brought about by the voters who put these people in office.

- Monday October 06, 2008 11:39AM EDT

Rampant inflation = precious metals - cash doesn't hold value in such an environment

- Monday October 06, 2008 11:40AM EDT

Vote "em out...Vote 'em ALL OUT.

- Monday October 06, 2008 11:41AM EDT

I guess the time is coming that Americans will have to do what they do in other parts of the world. Build products to sell and save money to buy things.

- Monday October 06, 2008 11:41AM EDT

I'm really concerned about this. If we have another depression, I don't think the people are going to be as well mannered as the last time. You might make money in this market, but when the dust settles, it'll be worthless. Prepare for the worst!

- Monday October 06, 2008 11:41AM EDT

invest in the ATF stocks - alcohol, tobacco and firearms

Yahoo! Finance User
Yahoo! Finance User - Monday October 06, 2008 11:43AM EDT

I am not a prophet....Some are having losing faith,some have a heavy losses,some are staying on hold for recovery,many are panicking,market is getting down heavily.........THE BIG QUESTION IS ........ARE WE IN THE BOTTOM..THAT IS FOR SURE.....ARE WE IN THE RECOVERY WAY.......MAY BE..........IS THERE A HOPE OF RECOVERY....THAT IS FOR SURE.....WHEN......JUST WAIT IF THERE IS A RALLY OF NONE STOP 3 DAYS IN A ROW FOR EVERY WEEK TILL CHRISTMASS AND NEXT LET SAY UNTIL NEXT APRIL....THE FRACTION OF A RALLY MUST BE 3/4 FOR EVERY WEEK UNTIL THE DOW JONES INDEX GO UP TO 12500 POINTS ABOVE.....BY THE TIME WE ARE SURE THE MARKT IS ON PATH TO RECOVERY.......DJ INDEX MUST RETURN 12500 THEN I WILL SAY RECOVERY IS NDER WAY........GOOD LUCK.

- Monday October 06, 2008 11:44AM EDT

This is easy, Move back home with mom & dad, Hell I'm only 51, Mom & Dad won't mind. I hope my room is still empty. My other choice is to stand with your legs apart, Put your hand firmly on your butt, Pull head between cheeks & kiss your Butt good by. Paulson is gonna be the most hated thief in this decade. May he rot in hell.

Yahoo! Finance User
Yahoo! Finance User - Monday October 06, 2008 11:45AM EDT

What good is diversification when everything is going south?

- Monday October 06, 2008 11:46AM EDT

Well, call your financial adviser as I did ,only to hear a recording stating office would be closed until 5:00 p.m. which is closing time. Mysterious!!! If I cannot not talk to my advisor during a crises , when do I need him? How about you? Can you reach your advisor???? What did he suggest you do? Did he /she hide?

Yahoo! Finance User
Yahoo! Finance User - Monday October 06, 2008 11:46AM EDT

I guess short selling wasn't the problem. I guess the BAIL OUT was.

- Monday October 06, 2008 11:46AM EDT

Cash is king! Don't be fooled by these hucksters. The Dow has still a couple more 1000 points to shed, with false rallies along the way. I see it stabilizing around 8000. Stay in cash till then.

- Monday October 06, 2008 11:46AM EDT

why worry and by happy. we are have to work till 65 anyway. market do good = better retirement. market sink = tighting the belt. we'll still live and be happy!

Yahoo! Finance User
Yahoo! Finance User - Monday October 06, 2008 11:46AM EDT

Wiki: Negligence: "It can be generally defined as conduct that is culpable because it falls short of what a reasonable person would do to protect another individual from a foreseeable risks of harm." This market collapse was foreseen by Sonders, Roubini, Leib, Schiff, Faber, Rogers among others. To not protect against such an impending tsunami when you heard such them ring the alarm bells is negligent if you are managing other peoples money. Diversification is not reasonable form of protection in the event of foreseen risk. Diversisifcation seems only reasonable when one considers risks that were not foreseen. Managers need to find more reasonable conduct to protect their clients assets than the modern portfolio theorie's diversification mantra. I see very little evidence in a market crash of statistical normal behavior for stock price movements that the theory was based upon. How many Black Swan 7 sigma events do we have to witness before we can topple the house of cards that the efficient market hypothesis has built up?

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