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Stock Market Correction: Now!! August 17, 2007

Posted by pf in Retirement.

Since I reallocated my portfolio on May 1st on the “Sell in May and Go Away” concept  (”Sell Stocks in May and Go Away?), I have given a couple of subsequent updates:

Sell Stocks in May and Go Away: Update

Stock Market Correction: Now?

Stock Market Correction: Maybe Now?

Well, after the past couple of weeks declines, it is definitely here folks.  As I have said in my earlier posts, I wish I had a bit more conviction to my decision to reduce my exposure.  As of this writing, I am probably down about $20K in my portfolio.  Granted, it would be a bit worse had I done nothing…but still stings a bit when I think about what could have been.  Of course, the exact opposite could have happened which is why they tell us not to time the market, eh?

 Regardless, I find the whole bit fascinating on a personal level for a couple of reasons:

  • As I am a relatively young investor, this is the first time I feel like I’ve “seen this before” where the good times roll and we get a bit excessive.  Although not completely like the 2000 meltdown with tech stocks, the overall sentiment is there.  For one reason or another, we build up stocks to lofty levels and then it all comes down on us. 
  • There have been a number of times where I had an intuition about where something may be going in the market and didn’t act.  This time I acted…a little bit.  Although I’m still not completely convinced, I would like to tell myself to trust my instincts a bit more.  Notice I said I was not completely convinced…I could easily just be a fool for acting on such “intuitions” instead of just setting up my portfolio and letting it ride like a good little long term, diversified investor.

Now I struggle with the obvious question….what to do next?  Today the Fed cut the discount rate and we got a bump.  I can either:

– cash out now and wait for this thing to settle down a bit (I think things may be grim and pretty volatile for awhile yet


– sit tight and do my knitting (so to speak).

 I’m inclined to pull back a little bit more (like I should have done before) as the sub-prime stuff looks poised to get worse over the next months.  Further, I feel like the US is in a bad way overall in the world right now…an excuse to push things down even further.  The scariest thing I heard was that China was concerned about how much money they had invested in the US.  Without China and other countries to prop our debt up, we are in deep doo-doo.

However, if I consider my available cash as part of my overall portfolio…I have about 1/3 in cash already.  Of course, I don’t have any intentions of putting that money into the market in the first place…so perhaps I shouldn’t think that way.  Anway, I a little over an hour to decide if I’m going to do “something”.  In the grand scheme, it probably doesn’t make a difference either way (I’ve got a long way to go before retirement), so we’ll just have to see.

If any of you have thoughts / ideas on how you are moving forward (doing nothing?), I’d like to hear it.



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