January 24, 2008
So, now what?
Well, that was a wild ride, says David Callaway in MarketWatch. Call yesterday’s “breathtaking” stock rally what you will—“a snapback rally,” a “dead-cat bounce”—but it was certainly “the most dramatic example in U.S. stock market history” of why small investors should stay in a turbulent market. Did it mark an end to the 2008 bear market bust? “Hardly.” In fact, the market’s “unwillingness to just capitulate and get the worst over” probably means weeks more of turmoil. But it was a glimpse of the eventual end of the credit crisis. And for anyone nervously eyeing his 401(k), it was a “badly needed reminder” that stocks “go in more than one direction.”
Of course, trying to figure out when stocks will change direction is a “loser’s game,” says John Waggoner in USA Today. And since “few of us are nimble enough” to time the market, your best strategy in this roller coaster is almost surely: “Hang in there.” But no one investment strategy works for everyone. If you’re feeling conservative, park new contributions in a money market fund, at least until “the market starts to rally again.” If you can “tolerate risk,” though, it’s a “rare buying opportunity.” Put money into your stock funds “that have been clobbered.” Either way, it’s time to rebalance your stock-bond mix, and that means selling your winning funds to buy more “losers.”