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Stock Market Timing…Resisting the Urge April 24, 2007

Posted by pf in Expenses and Savings.

It has been written over and over that trying to time the market is a fool’s game that almost everyone loses. However, I have been getting this weird sense that we are at one of those peaks and we are in store for one of those “summer swoons”.

I try to tell myself (talking to himself – not a good sign) that I should just “stay the course” as I have been for many years (and have generally been rewarded for doing so).  At the same time, there is another voice (oh, he’s hearing voices now – really not good) that is telling me to follow my intuition and reduce my exposure in some of my more volatile investments (example: emerging markets) for something a bit less so (ex: capital appreciation).

Ok, so other than my intuition, what signs are giving me these signals?  I can name a few:

  • General instability in the world – Iran, Iraq, and renewed attacks on Israel
  • Volatile energy markets
  • Buffet is 20% cash
  • Greenspan talk of 2007 recession (although he took it back, I still think he meant it)
  • US housing market decline include issues with sub-prime
  • Stock market’s long, positive run over the last several years
  • Dow almost at all time high

Granted, all of these issues are not new and despite that, the markets have gone up.  However, where is the inflection point where the perceived risks start to outweigh the potential rewards?  Ie – how much higher can this thing go?

What’s also interesting to me is that when I had a much smaller portfolio, I didn’t really care what happened, because even when it got bad, I would most likely lose less than $10K.  As my portflio has grown, some recent gains and losses have equaled $2000-$3000 in a single day and a 10% drop would be more than $20,000.   

So, what does this mean?  Is my portfolio to risky for my appetitite?  I really don’t think so.  Do I want to beat the market?  Surely…doesn’t everyone?  Am I becoming more fearful about potential losses versus potential gains?  Yes, I think combined with my desire to outsmart the market, I am getting to the point where I don’t see as much upside in the near term and am feeling like I should do something.

So, will I do “something”?  I don’t know yet. I very well may take some of the gains I’ve made in emerging markets and hope for a fall where I get in again at a lower price point.  Alternatively, I may continue to do nothing and stay the course.  Does anyone else struggle with this or is the answer so obvious, tried and true that it’s not even given a thought?



1. Re: money - May 2, 2007

All I have to say is “Ditto!” I’ve been feeling the same way about the market:
– Is it too high?
– Or should I just take the plunge and carry out my long-term investment plans? Afterall, if you do it for the long-term, there’s no reason to worry about short term losses, right?

I’ve decided to wait until fall for the big stuff, and play with the small stuff until then.

2. pf - May 3, 2007

While I generally agree with your sentiment about the long term vs the short term, I struggle with the idea of taking losses when I feel like the likelihood is so high. So, as you may have seen from my later post, I decided to act. Based upon my research, the fall is when you are supposed to get back in…summer is the historical time period for the drop. Let me know if you decide to do anything significant. Good luck!

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