Tired of the losses, wanting to see some trends highers? Today is not your day then. With the Volkswagen test scandal in Europe, the China manufacturing data still not looking good, the wakeup of Japan after the 3-day holiday closes, and finally the waiting of the statement from Janet Yellen about the inflation in the University of Massachusetts, world markets are sliding once again, for the fifth day in a row. This number is based on the MSCI 45 Country All World index. Japan got -2.2% from NIKKEI after the holidays, FTSE got -0.6%, DAX 30 -1.8% and CAC 40 got a -1.6%. This already settle the not so good environment. And because of that, US morning trades are falling as well, with -1.47% for Dow Jones, -1.6% for NASDAQ Composite, and -1.34% for S&P 500. Remember that the day has just begun in US, but still. So, what's your opinion on this fall? Some calls already this the proof that the economic growth is no longer there.
If you want to play it safe, repeat after me: BONDS! This appears the perfect moment, at least in my humble experience, to sit dow, relax, and grow your cash reserves until the shares start growing again. The VW scandal will definitely stay for a while, therefore the stocks should go even lower. Again, I'm just learning about the stock market, but this is what I'd do.
The safest play for long term investment is to just keep your diversified portfolio and not freak out. Stocks, funds and bonds, and not panicking. I find the loss in value right now morbidly fascinating but am not taking an actions based on it. It does amuse me that my only account currently in profit for the year is the small one I use to impulse buy consumer stocks and sparkly things I want to take a punt on. In theory a rather high risk strategy.
I agree, if you have done your homework in stock selection don't freak out. Stay the course. I look at this kind of market froth as a golden opportunity. With a conservative portfolio of dividend paying blue chip stocks in an IRA that I don't need to touch (except for the MRD) I view a market pullback from a perspective of reinvested dividends just buy more than the usual number of shares 4 times a year. Some of our larger holdings are CSCO, F, INTC and VZ. Perhaps not exciting, but such holdings didn't require close attention when I was working. Over the decades the longterm trend of the market is up. No worries. If I were still building my retirement fund in this current market, I'd be dollar-averaging, letting dividends reinvest, with both hands. Silly bank CD rates around here are still an offensive ~1%. About 8 years ago (I think) our local bank offered me a deal I couldn't refuse. Give them $50,000 for 3 years, and the bank would pay us 0.5%. The bank officer coukdn't understand why I took a pass. Highway robbery and totally pathetic.
I'm not sure whether bonds is a place that you'll get a whole heap of value. As for the stock market, the VW story certainly came out of nowhere and wasn't something we needed after Greece/ China/ talk of higher interest rates. But again, it really comes down to your individual risk profile, existing portfolio and holding period. Too many people get sucked into day-to-day noise and ignore the bigger story. It's about the longer term.
A 5 day loss on the spin isn't that uncommon and I'd you look at things short term you'd be starting to panic but looking at it long term there's no doubt that the market will slowly start to recover so I'm not overly concerned at the moment.
However, I don't know why you feel panic in my post, I am rather thinking about facts, and about what's happening. Is the economic growth threatened by these events for the next year (that's pretty mid-term, already)? In my opinion, it is just a little down and it will go back again in a upward pace, at least in United States. Bonds, bonds, if you talk about the government bonds, it depends of the country where you get the bond, honestly. Because if there's some countries where you feel mainly safe that bonds will repay, some other just put themselves into bankruptcy and then, your bond job is going to be a little more complicated.
When is comes to investing making any kind of change at all based on market changes that happens over the course of days or months is emotive, irrational and thus called a panic move. That is one of the things you will learn about investing. And bonds in any country are low yield. You can't lose that much and you can't gain that much. Any good portfolio should have some but investing in them heavily is only for people who hate even minor risk, or who are about to retire in the next year or so.
Well, government bonds, in my opinions are a little more risky these days, but also, I am not sure it is still profitable these days. I mean, if you take inflation into account, the bond may be make you "loose" money yearly, just less than if you wished to let it on a account. We're in a 1%-2% inflation world, and correct me if I am wrong, but given my knowledge, the bonds interest (what you win because you gave the money to the government, basically) is below 1%. About the company bonds, we talk less about these but maybe you could get a better interest rate. I don't know. But I knew the panic move now you talk about it, just I didn't used it since awhile. Not a problem.
I agree with the general sentiment of the posts above. A diversified portfolio of stocks should yield you with expected return while driving out your unsystematic risk. I do think this is a bit of a down period in the market, and the market is looking for the next big thing before it chooses a specific direction to move in, but one needs to not panic and remember that this game for the long run. A re-balancing of your portfolio could be a good idea, but this should be done after extensive research and shouldn't just be a panic decision. There are plenty of stocks out there that are currently very undervalued.
