In my opinion the key to investing is very simple: be in the market when the
indicators are positive and be out when they're negative.
Now you're thinking "that sounds great but what Indicators is he talking about?"
Looking at the S&P chart would be where I'd start. Is it rising is it making higher highs and higher lows which is positive or is it making lower lows and lower highs which is negative?
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Now it's not always going to be black and white and it's during those periods you have to be very patient. You might get whipsawed a little bit but in my opinion it's better than taking the big hit to your portfolio.
That is a great starting point and at least gives you some kind of guide.
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It makes absolutely no sense to stay fully invested when you see it trending
down. And it makes no sense to be totally out of the market when it's trending
up. This is something you should definitely consider for your 401k.
And, there are no tax consequences to selling. Let's say you have $200,000 in your 401k, and the market starts trending down. What sense does it make to ignore it? Why not move at least some part of it to cash? And let's say the market quickly reverses, what harm have you done? You've preserved your capital. And you get back in and you follow the same process. If you avoid the big downs like the aftermath of the dot com years or the real estate bust you'll be way ahead of the game.
Instead what happened is you got so freaked out you pulled all your money out of
the market and are now sitting in moneymarket earning zero or in bonds to afraid
to do anything. You either need to learn how to manage your money or find
someone that knows what there doing .
I know a lot of people are out of the market and have sworn never to get
back in. With moneymarket at zero and 30 year bonds at a little over 3 percent stocks are not something you should ignore. You just need to find someone to teach you what to do or find someone competent to manage your money.
Right now the market is trending higher. It went as low as the 1080 area and
ran up to the 1230 area. It than proceeded to pull back to the 1200 area before
reversing back up to the 1290 area. So you can see that presently it has made a
higher low and a higher high.
Until that changes its a good idea to be in the market.
