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Home > I am wussing out of the market.

I am wussing out of the market.

September 27th, 2008 at 02:55 am

I am once again trying to figure out the market...so forgive my ignorance a bit, I have some questions here:

I am in 'aggressive stocks' and 'conservative stocks.' But what do those terms mean? How much does a stock gain/lose in what time frame to be considered aggressive or conservative?

The news gives accounts of the stock market by saying "the market is down 20% from last month.." and obv that 20% is a compilation of stocks rising while others fail. But are conservative stocks currently tanking as well?

I am thinking of getting out a little bit. I am 98% in the stock market- I think 60% aggressive/40% conservative...and I want to move maybe 20% into a money market account just to make sure that come hell or high water I will have something in the end.

So I should take 20% from the aggressive stocks...right? I imagine the conservative stocks are quietly going along dipping and gaining in small increments and it is the aggressive stocks that are causing the wild fluctuations in my monthly statements-right?

I know you guys will tell me to look at my statements to find my weakest links...but honestly I really have trouble understanding my statement. I am going to set up a phone meeting with my financial advisor but we don't talk very often and I am not sure I am such a huge priority to him. He will do what I ask him to do-but does not often have many suggestions for me.

Also- The money is in an IRA I inherited- If I move money into a money market fund...I need to pay taxes on that money-right? I dont mind that idea- once the bailout starts and a new president comes in- he will probably raise taxes. Better to pay them now than later.

Do I sound completely crazy? My mind is kind of panicky. And I just want to be done with this wild ride. The govt may be doing all they can to calm people down with this bailout...but I just have a bad feeling about things. America seems very vulnerable right now and in this global environment- we are not the only people who know that. And once we begin this bailout plan- we will still be very vulnerable because I imagine the country might be close to broke for a while.

I dont have the experience to imagine what is going to happen in the future, nor the faith to see this course through. I may have my whole life to let the markets recover- but I also have my whole life to get back into the market later.

I feel like such a wimp. But I am done with worrying about the markets.

6 Responses to “I am wussing out of the market.”

  1. Broken Arrow Says:
    1222483784

    Typically, "aggressive" and "conservative" refers to how much stocks versus bonds a portfolio holds. 90% stocks with 10% bonds is considered aggressive, whereas 60% stocks with 40% bonds is considered conservative. There's more to this, but for now, let's just stick with that.

    Basically, what that also means is that when the market goes up, the aggressive portfolio will likely gain more than the conservative one. However, when the market goes down, the aggressive portfolio will likely lose more than the conservative one as well. In other words, aggressive portfolios are typically more volatile than conservative ones.

    Based on what I've read so far about your thoughts, I would have to agree that you should stick with the conservative portfolio. I think that will make you feel better. Of course, this decision is entirely up to you, but yeah, you're definitely conservative.

    And by the way, there's absolutely nothing wrong with having a conservative risk tolerance. People typically assume that being aggressive is better than being conservative, and that's not always true. What matters even more is the quality of your investments. If you think about it, you can be as aggressive as you like, but if your investments are all in poor and shady stuff, well, then the chances are good that you're going to lose a lot of money.

    This is just me, but assuming this is money you are saving for retirement some day, I would just roll it to a reputable investment firm (such as Vanguard, Fidelity, T. Rowe Price, and so forth) and simply put it all into a Target Retirement or Life Cycle fund. Set it on the appropriate retirement date and fuggedabutit.

    Otherwise, I would look into something along the lines of 60% stocks / 40% bonds as a basic starting point for your allocation. I think asset allocation can get kind of deep though, and I don't know if you want to get into that.

    Finally, please don't panic. Just ignore the market, take a deep breath, and go out and take a relaxing stroll or something. Then, either we can walk you through this, or you can just let your financial advisor manage it. The concern is understandable, but it's not going to be as bad as you might imagine.

  2. gamecock43 Says:
    1222484240

    thank you. I feel better already. I e-mailed my advisor...he'll likely get back to me Monday and maybe I will be calmed down by then.

  3. merch Says:
    1222489242

    Keep your IRA in the IRA. No sense in creating a taxable event when you don't need the money. Also, both canidates talked about lowering taxes.

    Try this survey to help with your risk tolerance.

    https://personal.vanguard.com/us/FundsInvQuestionnaire

    I think you also have to start looking at general investing. You have to get knowledge to understand this stuff then it won't be so daunting.

    I would recommend talking with your financial advisor. He should be like a teacher and let you know how this stuff works. You shouldn't invest in anything including mutual funds unless you understand it.

    The bottom line is that this is your money and he works for you. Do not be intimidated. When I started putting my money at Vanguard, I had $3,000 in one money market account. Today I have much more with them .. much more. My point is they cared about me understanding and I was never intimidated or pressured.

    Everyone has different risk tolerances. It is what you are comfortable with not me or anyone else. What is the point that you can sleep at night.

    I will tell you that the volatility in the market is unusually high. The VIX (volatility measure on the market) is the highest since September 2002.

    I can tell you that high volatility usually signals a top or a bottom. And I can also tell you that the market usually swings too far in both directions. And an old saying is that when there is greed in the street you should fear; and when there is fear in the street you should get greedy.

    Personally, I started buying sector funds in financials in March and just bought another big chunk this past week. I also have been building positions in REITs, which is the piece of my portfolio outperforming everything else I own. But I am comfortable with the risk.

    Good luck and I'll try to answer any questions you have just like a lot of other people here.

    http://www.fool.com/investing/beginning/what-should-i-invest-in.aspx?source=iibedihpc0000001

  4. baselle Says:
    1222491304

    Aggressive stocks and conservative stocks really don't mean much - you need to know what stocks you are in and see how they performing. Some of my stocks are holding their own - KO (Coke) as a conservative investment. MI (Marshall Ilsley) - as a financial, which in these times is a pretty darn aggressive investment, is also doing okay...for now. It ain't WM, at least.

    Second the do not sell the IRA money out and create a taxable event. You can change the proportion of what's in your IRA and still keep it in.

  5. monkeymama Says:
    1222526801

    I was going to say - you should be able to buy cash or bonds within the IRA, correct?

    I also have to add 98% stocks is very aggressive. 80% is very reasonable, regardless. No prob with your plan.

    Because you are young and you do have such a nest egg, I truly think you have the luxury to go to 60% stocks.

    I wouldn't advocate panicking, it would have been wise to do this from the getgo. But here we are, & might as well do what makes you feel more comfortable. However, if you get a more conservative mix, just stick with it. You don't want to be continually adjusting your mix. Because you will tend to buy high and sell low in the long run.

    I personally tend to be very conservative but I feel I have no choice but to be aggressive early on, to fully fund my retirement. If I had your kind of assets I would probably be 60/40, honestly. I would feel I would have that luxury. I would be heavy in the stock market, & heavy in cash; the best of both worlds. You shouldn't be stressing out. You do NEED a more conservative mix. For your peace of mind if nothing else.

  6. scfr Says:
    1222534254

    ditto what Monkeymama said! Can't undo the past ... Look at this as a good learning experience ... Come up with a mix you can live with and stick with it. No shame in not wanting to be super aggressive.

    As merch said, might be a good time to learn about the nuts & bolts of investing. The Wall Street Journal puts out some good basic guidebooks.

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