Tuesday, December 22, 2009, 8:53PM ET - U.S. Markets Closed.

Small Investors Who Panicked in March Now Have No Clue What to Do

Posted Nov 04, 2009 09:00am EST by Henry Blodget in Investing, Recession, Banking
The precipitous collapse that took stocks down almost 60% from their highs scared many small investors out of the market, says Jeff Mortimer, CIO of Charles Schwab Investment Management.  And now, sadly, these investors have missed a massive rally.

So what should they do now?

Ease their way back into the market, says Mortimer.

Yes, it hurts to buy in at prices that are 50% higher than where they were when you ran for the hills. But the alternative--missing more of the rally--is even worse.
 
Usually, Mortimer says, investors who bailed at the bottom don't get comfortable enough to buy back in until the market has doubled off the low. And we're not there yet. 

Mortimer thinks gains over the next year will be muted--5%-10%--but the alternative is near-zero returns on cash.

And, next time, don't believe those folks who tell you "buy and hold is dead"!

183 Comments

Rick
Rick - Wednesday November 04, 2009 09:14AM EST

He is telling people to get into the market even though the fundementals are not there ... you have to ask why .... hmmmmm .... does he or his clients stand to profit from people jumping in ... hmmmm .... is he trying to cover his shorts .... will he be telling everyone to get out before he jumps out ... so who will lose money on the next crash

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:17AM EST

I always buy on the dip. Only an idiot buys at the peak. There's always something oversold and there's always something overbought. You need to find the beaten down sections like Regional banks, they'll be the next darlings of Wall Street as soon as Wall Street comes up with a credible story to sell them to gullible investors.

DenisW
DenisW - Wednesday November 04, 2009 09:18AM EST

Yea, go ahead jump back in and by. Goldman is waiting for you. LOL

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:19AM EST

I wonder if he'll still be saying that when the Dow is at 6000.

Michael
Michael - Wednesday November 04, 2009 09:21AM EST

Keep interest rates sub-par and market the need for a "Commissioned Broker" to save me. Sounds as if "Benny" and the boys are getting a kick-back. The BS just doesn't stop.

Terry
Terry - Wednesday November 04, 2009 09:23AM EST

I tell my friends and family that are not traders to stay away from the market because it is rigged against the buy and hold investor. I trade daily but that's because I ride the trend and hedge. The market will take the money of buy and hold accounts as it always has. Wall St. produces nothing so it funds itself on suckers and flushes them out when they least expect it.

Frank
Frank - Wednesday November 04, 2009 09:27AM EST

Got Out over a year ago.. didn't lose anything when the market collapsed, but also didn't make anything the past 6 months.. HOWEVER.. now the market is ready to turn over and head down.. not in and very happy not to be... if you are in today.. good luck... you are going to lose your lunch

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:28AM EST

If you missed the bottom, do not buy. If you got in at the bottom, hold. Short term capital gains will kill your profits.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:32AM EST

You get a story at the top of stocks and you get a story at the bottom of stocks. Don't fight the Wall Street propaganda machine, you can't. Let it be your friend, find the oversold stocks, buy somewhere near the bottom and wait for the story to drive it back up. I've found that exponential moving averages are outstanding for timing the bottom. Don't worry about being exact, if you buy within plus or minus 5% of the bottom, you're doing great.

Terry
Terry - Wednesday November 04, 2009 09:33AM EST

The system is broken and most are broke so why gamble in a manipulated system that bails out the connected at the expense of the little investor. The solution is to clean house in Congress where the fault lies for the crisis. The financial industry has lost your money they had you bail them out and the government is printing money 24/7 and they will send you the bill in 2010-2011 of course after the elections. GET SMART... No Senator should be in office more than 2 terms (12 years) and no Congressmen/women should be in office more than 3 terms (6 years) otherwise they do too much harm to us all. VOTE OUT the INCUMBENTS in 2010.

Tex
Tex - Wednesday November 04, 2009 09:33AM EST

I bought and held; didn't listen to the doom & gloomers. I'm down about 5% for the year. I am now re-balancing losses & gains for tax purposes. I want to beat the December rush. I expect to be even early next year and up 10% by end of 2010. Expect DOW 16000 by 2016.

hadenoughgov
hadenoughgov - Wednesday November 04, 2009 09:36AM EST

ANOTHER SHILL for wall street, yea get in so they can gut you and make their profits.

DON P
DON P - Wednesday November 04, 2009 09:37AM EST

How come I didn't get a call from my broker when the market dropped? I understand fluctuations but there should have been a call to discuss, move, diversafy...something, guess they didn't care. Prior post is accurate, I have no losses, don't need the banks with 0% interest, better to buy food for the family, guess I'll just watch the market move 400 points every few days and wonder who the real sharks are. I see lots of bloodletting here in CA, Hope you all have a job at Christmas!

Terry
Terry - Wednesday November 04, 2009 09:37AM EST

The system is broken and most are broke so why gamble in a manipulated system that bails out the connected at the expense of the little investor. The solution is to clean house in Congress where the fault lies for the crisis. The financial industry has lost your money they had you bail them out and the government is printing money 24/7 and they will send you the bill in 2010-2011 of course after the elections. GET SMART... No Senator should be in office more than 2 terms (12 years) and no Congressmen/women should be in office more than 3 terms (6 years) otherwise they do too much harm to us all. VOTE OUT the INCUMBENTS in 2010...

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:38AM EST

Problem is not "I'm scared to get in", it's the fact that no one has any cash. Many have been laid off, or are underwater on mortgages or are just worried about buying the essentials. The destruction of the financially secure middle class has been more of a success than they could have imagined.

san
san - Wednesday November 04, 2009 09:39AM EST

It's makes perfect sense it's gone up because they printed a shed load of dollars and all these extra dollars are chasing the same assets. Inflation at work.

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:39AM EST

funny ways, strange ways, but give ME your money... I'm smarter than you, I know all the buzz words.... oooooo, but please give ME your money.. ah, ah... TRUST ME... ya, that's it trust me.....why of course it's a BULL market.. obama is prez... V shaped babee... the economy is great.... trust me... sound like barack hussein obama doesn't he? mmm mmm mmm

Yahoo! Finance User
Yahoo! Finance User - Wednesday November 04, 2009 09:40AM EST

The rally experienced since March is of a bear market variety. Various signals and statistical measures indicate this. Read more at http://www.TheSentinel.biz

Jed
Jed - Wednesday November 04, 2009 09:41AM EST

I use 10% trailing stops and only place one trade a month. Worked so far. But really, in this manipulated, corrupt market where down is up and the fundamentalds and the charts mean nothing, its just one big money-laundering slot machine. Don't think of it as investing, please. Good luck and God bless.

Nick
Nick - Wednesday November 04, 2009 09:42AM EST

This man obviously has been reading the comments here on TechTicker! How many people on here are commenting on "this is a sucker's rally" or "the markets are rigged", or "we will hit new lows". These folks are all ANGRY because they missed this 60% uptick since the lows of March 2009. Here's the real deal folks. ANYONE on here is more than welcome to debate me using NUMBER AND LOGIC if you care to. Last week I received an offer from a big name bank to buy their FDIC insured 1 year certificates of deposit. The rate they were offering me to tie my money up for a full 12 months? A whopping 1.75%. You read that right...they keep my money for a year and they pay me one point seven five percent AFTER that year. So, for an investment of $100,000 they will pay me $1,750 in one year's time. On the other hand, I was looking at a slew of diversified utility companies. Names like Dominion Resource, Duke Energy, Allete, American Electric Power. They are presently paying dividends in the range of 5% to 6% annually. That means that if I invest $100,000 now, I can earn roughtly $5,500 DURING the course of the year (dividends paid to me every 3 months). Not only are they paying that much in dividends, but they are also selling at about 20% lower than their 52 week highs. Meaning, there is POSSIBLY some upside potential in terms of capital gains. So, in theory, an investment of $100,000 could pay me $5,500 in dividends throughout the year AND just MAYBE another $20,000 of capital gain profits sometime during the next 12 months. Let me also state clearly that if you look at the divident payouts of these utility stocks versus the earnings per share, they have plenty of coverage for the dividends. That is, this is not some ponzi scheme; their profits are real and they have enough in profits to cover their operating budget, make capital improvements in their plants AND continue to pay dividends to common stock investors. So, what do you want to do with your money? Earn less than 1% in a money market account? (That would be a meager $1,000 on an investment of $100,000. Or, make 5 times that much in somewhat safe stocks such as utilities?

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