Scott, your advice is outstanding and it really resonates with me. The only quibble I would have is that I would personally be prepared to be extra flexible on my dollar cost averaging targets during this time so as to stay as liquid as possible.
I agree that it's important to maintain the discipline of investing, but I also think it's important to honor the realities of cash flow that might be more restricted than usual during tough economic times and also maintain flexibility and liquidity in case new business opportunities should present themselves.
Scott:
Thanks for sharing your thought. With all due respect, I am the exact opposite from your proposal. Usually I hold 80% in equity. 20% in cash. (Never a big fun of Bonds, besides US Treasury).
During boom time. (either SPY P/E > 16 or I have multiple 52-weeks high alerts from my portfolio) I sold some equities and raise the cash to 30%.
During bear market (either SPY P/E is below 12, or I received multiple 52-weeks low alerts from my monitor lists), I bought more equities and cut my cash down to 10%.
I did do a throughly fundamental analysis on the companies before any buy or sell. Right now, I am 90% in equity and 10% in cash.
Like other aspects of investing, Asset allocation is simply, but no easy
Re: What a bold move
mInvestor
10/22/2011 2:18:24 PM
Scott,
Thank you for sharing your thoughts with us. Not to unrespect you or undervalue your thoughts, just my 2 cents after reading your article.
1. Doing selling (especially big one to reach 90%) seems to be extreme. Because the market is so volatile, it's really hard to grasp the best selling timing.
2. Long term stategy is necessary for every investor. And different goals mean different term. Some people can plan for 30 or 20 years retirement. Some people need to plan for just 10 years for their kid's education.
3. Evaluate the possible outcomes. This is a great call, especially now. We need prepare ourselves for most outcomes.
4. Dollar cose average in: that's I am planning to do now. It's really hard to timing the market now.
5. Secure a career, that's important. Maybe we shall also start to see if there are other ways to help on cash flow.
Thank you again to write this important piece and share it with us. It's critical to have a strategy like this during this purterbation period. I myself will come out a strategy soon.
Re: What a bold move
Phoenix
10/21/2011 1:30:59 PM
Thank you Scott for sharing your insight with us. I've also only invested in guaranteed return on investments. Nothing risky right now. I don't want to play around with such a volatile market. So I think you are right to make this strategic move. I don't see the point in risking too much when it becomes more of a gamble than an educated guess.
Re: What a bold move
CCDUENO
10/21/2011 1:26:57 PM
I wish I had the cash to do such a thing, Im really small time.
however I am thinking long term and trying to think along the lines of buy and manage loss strategy. Personally I agree that the bear market will eventually turn around within the next few years.
I only buy dividend paying stocks at the moment, and in increments of 30 shares (most of my stocks are around the 30-20 dollar range) so I find myself spending maybe up to 800 a pop. now with the commission fees that I am being robbed for, that means I would have to see an .11 cent raise before I can even start seeing a gain.
right now it seems im really only paying for losses, and commissions, however im betting that if I can keep the losses low enough and build the number of shares up (reducing the cost per share) when the bear market finally gives, I will have bought up enough shares to make a decent gain (plus the dividends are helping out too)
Its tough to keep this strategy going being that some of these shares have drop 2-4 dollars in a day it seems. but I know that if I can manage the losses, (say at perhaps at a loss of 1 dollar per share) at some point its gonna turn around, instead of me waiting for the market to bottom out.
probably amatuerish, but I think ive been managing.
Re: What a bold move
tokyogai
10/21/2011 10:09:38 AM
IOt may be a wimpy move, but it seems to be what is warranted right now. I have gone to 80% cash and thought it was only me who saw more potential downside than upside. People should really look at this advice.
Noreen,
Actually it's a totally whimpy move! But transparency is best..
--Scott
Wow Scott. This is a bold and transparent move. Can't wait to see how the strategy unfolds over the coming weeks and months.
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