Thursday, November 20, 2008

 

When to buy

How often have any of you guys heard me say that now is a good time to buy stocks? Almost never. Well now is the time to consider beginning a program of buying stocks over the next several years with idea of being fully invested by the end of 2012.

First let's define fully invested. Everyone should alter their balance between stocks, bonds, and cash based on their age and on whether the stock market is over, under, or fairly valued. Diversification should be considered and your overall wealth- people who are wealthy enough to not need a certain portion of their assets in their lifetimes can hold more risky assets. Every year or six months you can go through your portfolio and decide what to buy or sell. Otherwise, ignore the market, ignorance is bliss as long as you know that you are not over invested.

I do not think that anyone should be shocked if the Dow went down to 4K or even lower. Markets tend to overshoot value in great extremes. Just as long as you do not lose your nerve or your job then you will be fine even in a depression. I am sure that the U.S. will survive and that the stock market will recover in time. Just don't be shocked by how low we can go when the general public panics. So far, I haven't seen that panic. We must have panic selling before the bear is over and that will be fairly soon if I am reading things correctly.

One more thing, I am always early. :-)

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