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The Simple Dollar Morning Roundup: Nesting Edition 18comments
Nesting is in full bloom at our house right now. Everything is all about getting ready for the baby, with lists of all kinds of tasks to get done before child #2 arrives early next month. We’re transitioning our son to a twin bed over the next few months (intermediate step: the crib converts into a toddler bed), cleaning, preparing food in advance, cleaning, organizing clothes, moving furniture, cleaning, and so on.
What If The Stock Market Makes You Nervous? J.D. basically comes to the same conclusion that I do: don’t invest in stocks if they scare you. I wonder if any of the commenters who disagreed with me will disagree with him. (@ get rich slowly)
Why Do People Accept Wedding Gifts? We did not expect any gifts at our wedding - if people wished to give us a gift, it was their choice. We merely wanted people to share in one of the biggest days of our lives. (@ money, matter, and more musings)
Can I Use My Emergency Fund For That? Sometimes people save up an emergency fund, then blow it on something not really necessary (a facelift comes to mind). Here’s a hot tip: it’s an emergency fund, not an expensive frivolity fund. (@ we’re in debt)
Add More Tools To Your Arsenal To Help Solve Your Financial Problems I like this quote from Abe Maslow: “When the only tool you own is a hammer, every problem begins to resemble a nail.” (@ generation x finance)
The Simple Dollar Retro: 25 Things You Should Always Have In Your Car It has a bit of the northern Midwesterner in it, but most of it is true no matter where you live.
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I didn’t state it strongly in the article — I edited this piece severely before posting — but I believe that anyone who is scared of the stock market should make time to overcome this fear by doing some research.
Personally, I think that pulling your money out based on short-term performance is foolish, and the kind of mistake that causes people to not get rich, slowly or otherwise. I believe that if a person takes the time to educate themselves, they’ll see that regular contributions to a low-cost index fund regardless of market conditions is the best possible investment.
So, yes, while I do think a person shouldn’t remain in the market if they’re risk averse, I think it’s important to obtain enough information to mitigate this aversion.
I think J.D. just called Trent foolish.
I think J.D. just called Trent foolish.
Ha!
I think Trent’s a smart guy and knows what he’s doing. Plus, he pulled his money out to buy a house, which you’ll never hear me condemn. I just want to make it clear that I think that market timing of any sort is actually detrimental to investment success.
I don’t like market timing either - I’m not sure where this idea came up. My only point is that if the volatility of the market right now is bothering you, you need to get out of stocks and invest elsewhere, because it’s par for the course.
Trent: Stop playing the victim. In your original article on investing in a down market, you stated:
“If I were Lila, I’d move everything into a money market account for a while and sit on it for at least three weeks, then wait until I started feeling confident about the stock market again - or at least until I felt it was close to the bottom…”
It’s very clear here what you were advocating, even if you tried to back off from it later.
I wholeheartedly agree that if a person isn’t comfortable in the stock market, then they shouldn’t be there in the first place. However, that’s not what you were advising in this piece. In that case, however, I think they would be well-served to to take JD’s advice and educate themselves about the stock market.
“If I were Lila, I’d move everything into a money market account for a while and sit on it for at least three weeks, then wait until I started feeling confident about the stock market again - or at least until I felt it was close to the bottom…”
I don’t see how that could be misunderstood. You were telling her to pull her money out of the market for three weeks and then put it back in when she felt confident. When exactly do you think she would feel confident again? Most likely when the stocks went back UP, sealing in her loss.
t was bad advice, admit it and move on. Don’t make comments like “I wonder if any of the commenters who disagreed with me will disagree with him.” making it sound like JDs advice vindicated your stupid comment.
Love your site by the way, I am just sick about hearing about this so if you bring it up again you lose a reader.
Admit that you were wrong and move on with it. Don’t be a condescending pr
I think its pretty obvious that you meant exactly what you said…that if YOU were HER, YOU would take the money out of the market and put it back in later. Just accept the fact that what you said was bad advice and stop blaming all of us readers for your mistake.
Yes, if I were Lila, what you quote from that earlier post is exactly what I would do - and it has nothing to do with market timing. She’s obviously very unsure about her investment allotment in her retirement, so she should back off for a while until she can figure it out.
I’m encouraging her to go back to stocks eventually because of the potential gains, but she needs to get out of them for now because it’s not worth staying up worrying about it.
Remember also, if she gets out now and puts her cash in a money market, she gains 5% or so while the stock market spirals downward OR goes upward.
Putting money in the money market account is kind of like taking a time out on the stock market until one can research and understand it and thus invest without having to worry. Remember that in the money market, it’s not as if the money is sitting still - it still earns 5-6% or so.
The fact that putting the money in a money market for a year or so until one figures out their risk tolerance right now has the benefit of doing this while a bear rules the market. Thus, when she gets back in (which she will likely do once she actually studies it), she will, in my opinion, get back in near the bottom.
Market timing has absolutely nothing to do with this. It’s all about figuring out risk tolerance.
If you want me to “admit” that market timing is stupid, something I’ve said over and over again on The Simple Dollar, I’ll be glad to.
I think you’re all reading the phrase “wait until I started feeling confident about the stock market again” in a different way than I meant it. What I meant is feeling confident about the fact that it is very volatile, not about the immediate bull or the immediate bear. I probably should have worded it better, I suppose, because under that context, it’s easy to see that conclusion.
Again, no admittance that you were wrong, just telling us that we were all wrong. Later.
Chris, kindly look right above your comment!
So when you wrote “… but I will say that the stock market as a whole has me very nervous right now and I currently do not have a dime in stocks …” you didn’t mean that you sold all of your equity holdings and you are waiting to re-enter the market?
I sold every single bit of my equity holdings in June and I have no interest in re-entering stocks for a while. At the same time, in my opinion, the stock market is going to go down quite a bit from here.
Now, the real scoop: I sold all my stocks in June to pay for a house, which I discussed on here. It also depleted my emergency fund, which I’m currently focusing on rebuilding, along with debt repayment. I’m not planning on re-entering the stock market no matter what until I’ve got my emergency fund back where I want it and my student loan debts are gone.
I’m not doing market timing as an investment strategy - it’s pretty much a fool’s game. I will say, though, that if I had a lot in stocks right now, I would be expecting another 2001 and 2002. Which would be okay with me considering how nice 2003-2006 were (it would also somewhat depend on what the investment goals were).
So what you meant and what we all read are not the same. Good.
I think the end result is that what we read, ‘try to time the market’, is poor advice which neither you nor we would choose to put our names to.
What you meant, ‘don’t invest unless you are comfortable with investing’, is IMO reasonable advice, with the caveat that one should seek to become comfortable if possible.
You got it, Plonkee. I should have written that portion better. I got frustrated because I knew what I was trying to say and I couldn’t conceive of how people would think that the idea was flat-out wrong.
I don’t like market timing in general. Sometimes though there a re clear cut signs things are about to go way down. Look at the current situation - Interest rate on jumbo mortgages (over $417,000)jumped to 8% as no one wanted to buy them. Creditors suddenly ct all bond issues to c credit corporations and rates on junk bonds suddenly skyrocketed. Treasury bond prices started to climb. Private equity firms had driven LBO prices to extremes. These companies have become severely over-valued and debt ridden. All these things were happening before any major market changes and all pointed to serious problems about to occur. I pulled my pension in full at that time and could buy back in today at over an 8% gain. while I’m not going to jump out every time I hear bad news there is way to much of it at the moment for a correction not to occur.
Trent - I’m glad Plonkee was able to say what you mean. It’s unfortunately a part of putting yourself out there that sometimes people won’t get what you’re saying. But that’s why we have (blogging) friends - to help us clear things up. :) (Maybe you could actually post those comments and all this hullabaloo can die down.)
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Trent; I wonder if you were into the personal finance thing when you and your partner decided to have a second child (or when you had your first, even)? As I’m sure you’re aware, children cost an enormous amount of money, so I wonder if that cost factored into your decision.
ben @ 8:14 am August 21st, 2007 (comment #1)