Is it Time to Get Out of the Stock Market?

Posted on March 19, 2013 by John Schmoll in Investing

Unless you’ve been living under a rock lately, you know that the stock market is all the talk recently. Whether you watch CNBC, CNN, or MSNBC everyone seems to be talking about the stock market and the fact that the Dow is at historic highs and that the S & P 500 is flirting with their high. Whether this is truly newsworthy is a different topic for a different time, but this optimistic talk has all of a sudden made everyone a pro at stock market speculation.

This is understood to a certain aspect as many people are concerned about their retirement portfolios and do not want to return to the 201k days that summed up about what many felt about the 2008-2009 period. This all begs the question of whether now is the time to pull money out of the market or if it’s time to get in.

What Goes Up Must Come Down

This is a well-known axiom in the investing community. If life were all lollipops and puppies, then the stock market would just continue to go up and up. Unfortunately, there is a little something called reality and a continued, unceasing trajectory is impossible. While I may dislike seeing investment losses as much as the next person it is vital to come to grips with the fact that you will lose money when investing in the stock market .

We can never truly know what exactly is going to happen, but if we read the tea leaves, then we can see some indicators that might make some pause. Key among them is the fact that piles of money are going into equity based funds and the fear index is low. This generally means that people, in general, are feeling good about the prospects of the stock market and feel so good in fact that they’re jumping in head first.

When done for the right reasons, I generally do not have issue with that. However, when it’s done to follow a herd mentality then I began to have an issue with it. It reminds me of when I was growing up and when I asked to do something that was not the wisest thing to do, my Dad would always come back with the same saying, “If everyone jumped off a bridge would you do it?” I hated hearing this as a kid because I just felt like he was not allowing me to do something I wanted. I mean, how could I be the cool kid if I did not do what everyone else is doing?

The moral of my rambling story is not to jump in head first just because everyone else is doing it. I am not an expert at speculating on the stock market, but I do know that what goes up must come down. I don’t know if that is 5% or 25%, but it will come down. This is also not to mention the fact that I agree with Warren Buffett  when he says that hes greedy when others are fearful and fearful when others are greedy.

Who Should You Listen to?

If you read many personal finance blogs, then you’ll know that this is a topic that has been discussed ad nauseam lately. Everybody seems to have an opinion on being in the stock market, so that makes me truly original I know. That said, there are many voices vying for your attention when it comes to investing. You can watch TV or read on the internet and find such divergent opinions in a few short minutes which, in the absence of a clear consensus, leaves some wondering what on earth to do.

While the noise can make it difficult for many to decide what to do when it comes to their investing strategy . I will say to be very careful of who you listen to when it comes to making an investment decision of your own. Only you truly know what is important to you and only you will look out for your best interests when it comes to investing.

Know How Being in the Stock Market Plays in Your Future

I have written before about having an investment plan and the current state of affairs in the stock market is one of the very reasons why I think it’s so vital to have one. If the stock market does make a correction, then do you really want to lose money because you did not have a stop loss in place? On the other side of the coin, as the Free Financial Advisor so aptly put it a few weeks ago now is the perfect time to invest as it was a week ago and so forth.  Don’t let the talking heads on TV scare you into thinking that the sky is going to fall and that we’re going to see Dow 5,000. Understand that their job is to sensationalize to get ratings and that in general, they do not care about your retirement portfolio.

I often find that times like these are a great time to look at your overall portfolio and assess where it’s at. Are there some dogs in your online brokerage account. like Scottrade , you need to get rid of in order to cut losses? Are there some winners that you should take the gains on? Or, do you need to do nothing? These are all questions you should be asking yourself in times like this. This requires a long term view of one’s investments and not what you fear might happen tomorrow. If you make a decision based off this fear then you’re inclined to negatively impact your portfolio.

Speaking personally, this is where the importance of saving for retirement comes in, along with making sure that we’re making wise decisions as we look at what winners we should be selling and how we might need to rebalance our overall portfolio some. So, to answer my headline…Is now the time to get out of the stock market…Yes AND No!

What are your thoughts on the current state of the stock market? Are you making any changes in your portfolio, or are you staying the course?