Quote:
Originally posted by gmeteer
The economy may be in an initial phase of acceleration upward, even though the last quarter showed a sluggish period(+1.3 %). It is possible the market has already started its next leg upward, with more canny investors already in. Once it is confirmed that the economy is in fact rising again, the market could bound upward sharply as those investors that waited for confirmation of a rising market re-enter the market(meaning you just missed the sweet part of the rise). You sometimes hear advice to sell into a rally when the price/earnings ratio begins to decline and corporate earnings increase, which sounds opposite of what should be, but is borne out by many years of market experience. This advice, of course, requires the intestinal fortitude that can absorb risk and still sleep at night, because it is contrary to the conservative advice of many financial counselors. However, safe investing will never make you rich, you will always be following, not leading, the curve.
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We have had around 90% of our qualified (401K and IRA) plans in the market and about 70% of our other non plan investments in for over 25 years. When we retired 3 years ago we reduced the market exposure down to 70%. We both took major hits (on paper anyway ) in Oct. 87 and in the .com bust but kept the contributions going to the market and all has turned out very well.
What I'm trying to figure out is what you mention. Is this the beginning of a major rally as money re-enters the market or just a short rally which might be a good time to cash more out of the market down to maybe 60% exposure.. Everything I read says there is a lot of money sitting on the sidelines at the moment.
I saw first hand what rampant inflation does to fixed incomes back in the 70's and to get totally out of the market is asking for potentially very serious financial problems in the future. I don't think 60% exposure for someone 60 is much out of line but will definitely reduce the exposure further in future years