AnonLadyOnline Posted February 5, 2009 Posted February 5, 2009 Hi, in this economicial crisis I wonder if there is anyone who can give me impartial advice on what I should do right now. I invested a substantial amount of money with one of the largest high street banks about three years ago which has a great deal of emotion attached to it as it was left to me by a faimly member. So....Do i pull it out taking the loss and put it someplace safe OR ride out the storm with it at risk of losing more and more. I feel like I have a barrel of money (and emotions) just pouring out of an open tap and I am so scared of losing everything, but I'm also afraid that I will do the wrong thing and take a massive loss which I might regret too. Any advice will be much appreciated, thanks.
Seymore Posted February 5, 2009 Posted February 5, 2009 I wonder the same thing. I had $10,000 invested in my IRA at the beginning of last year. By the end I had $5,000. My dad's even good with investing and he lost half of his retirement. Everyone keeps telling me "Oh, keep it in there, ride it out" (that's what she said), but come on now...I'm going to be broke!!!
StrawberryYogurt Posted February 5, 2009 Posted February 5, 2009 I wonder the same thing. I had $10,000 invested in my IRA at the beginning of last year. By the end I had $5,000. My dad's even good with investing and he lost half of his retirement. Everyone keeps telling me "Oh, keep it in there, ride it out" (that's what she said), but come on now...I'm going to be broke!!! IRA is for retirement. If you are young and say 30-40 yrs away from touching it, keep it. Long term, investing in stocks is the way to go, empirical data shows this to be true. As for the OP, she probably should not have been investing heavily in stocks if she was needing the money within 7,8, 10 yrs, but that's all water under the bridge. I don't know what to say about her situation.
russ978 Posted February 5, 2009 Posted February 5, 2009 It depends. Has the last 12-24 months greatly changed your long term outlook, objectives, and goals? Has your risk tolerance changed to the point where you would be happier witha lower but more reliable return? In this case, I'd recommend meeting with a fee based financial planner who can help you identify what your long term objectives are. Yes, it sucks to look at account values that are steadily declining but for anyone with a 20 yr + time horizon, recent events shouldn't drastically change ones long term strategy. I have continued on path and am will plan on making regular investments according to the plan I created when I first started working. Long term, I'm not too worried...as long as you're sticking to a plan, you should be prepared for the potential ups and downs and be aware of the overall situation...but the market losing so much value so quickly shouldn't immediately cause a shift in your overall investment approach. Again, I'd meet with a fee based financial professional that can help cater an investment plan specificially for you...what's right for 1 person is rarely right for another.
AnonLadyOnline Posted February 5, 2009 Author Posted February 5, 2009 IRA is for retirement. If you are young and say 30-40 yrs away from touching it, keep it. Long term, investing in stocks is the way to go, empirical data shows this to be true. As for the OP, she probably should not have been investing heavily in stocks if she was needing the money within 7,8, 10 yrs, but that's all water under the bridge. I don't know what to say about her situation. I don't necessarily need to the money but I'm young and I don't know what the future will hold... The more I think about it, the more I'm thinking about taking this hit and getting out while I have something left to take out
Lamprey Posted February 5, 2009 Posted February 5, 2009 Everyone heard the adage, "buy low, sell high" right? Right now the market is low. So why would you sell? The money you invested has most likely been put into stocks. It was used to buy a certain amount of shares at whatever price they were going for at the time. To simplify, say you invested $10,000 into equities (which is financial parlance for stocks). The average price of a share is $100 at the time you invest - I say average because your portfolio certainly includes stock of many different companies, all with different share prices. So your investment ends up being 100 shares purchased at $100 each. Make sense so far? Now, imagine the market goes down - as it has now. Stock prices tumble and your average share price is now $60. thereforee, your statement says that your investment is now worth $6,000. However, that's only current value of your portfolio - remember that you still have your 100 shares. If you sell now, you're converting your stocks into cash at the reduced price and basically "locking in" your loss. If you do that, you do get some relief - remember that capital losses (losses on stocks) are tax-deductible. They will reduce your income for the year and, if that pushes you into a lower tax bracket, you can actually come out ahead. However, I wouldn't recommend this. Let's get back to your current situation: your portfolio of the same 100 shares lost value and is now worth $6,000. When the market turns around, share prices will go back up - they always do - and your 100 shares can climb back in price and eventually be worth the $10,000 you invested, and possibly more. But they won't do that if you sell them while they're low! Your losses right now are only on paper. They can get bigger, and likely will in the short term (next 1-2 years) but over a longer period of time (4-6 years) they will most likely disappear and you'll end up with a net gain. So what you should do is what your finance guy is telling you: sit tight for a few years and wait till your investment goes back up in value before you sell anything. If you take your money out (sell) now, you're doing the dumbest thing you can do! Once your investment is back up to what it was, then you can sell. If you're worried about this sort of thing happening again - and it will, it's cyclical - then at that point you should put your money into fixed income (debt, or bonds). Fixed income investments are much less sensitive to market fluctuations; in fact, they tend to make more money when the market is down because that's when people freak out and buy them so their price rises. On the other hand, fixed income goes up in value a lot less than equities do when times are good, so by keeping everything there during good times you're missing out on potential gains. As long as we're here, this is why most financial managers recommend investing in more debt for older people and more stocks for young ones. Over a long period of time stocks will go up in price much more than debt, but they fluctuate more. Young people can afford to keep their money tied up while economy cycles from bad to good while older ones, well - they care more about not losing any value because in by the time they'd have posted a large gain in 10 years, they can be dead of old age
FortunateOne Posted February 6, 2009 Posted February 6, 2009 It's tough to tell you what action to take when there isn't enough data to go on. What type of account is it? What type of bank? Or name of bank? What's your tax structure? How was the original investment conveyed to you? And so forth... You see how it'd be difficult with out a lot of details. I have shorted a lot of financial and banking stocks because I've know about this banking mess for the last three years. The only stable banks that will rebound in the next 10 years are the big five. As for any regional banks, it depends on their liquidity and small market conditions.
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