I used to be like this. Then I realized the only reason I was being totally "buy and hold" passive was because of laziness, by not taking the time to learn the skills needed to take a more active role in my portfolios management.

I am presently early on in the learning curve, but starting when I did saved me from a lot of loss.

Well, you're probably wrong...this is vastly different from other periods in history. Feel free to go insane.

FWIW, I've lost a nice chunk myself, so I'm not completely without pain...but I actually added it up last night so that I could just go ahead a face the music.

I don't know...you might need to read the paperwork or possibly even talk to someone either in HR or at the plan administrator itself.

People tend to over-react. This is my opinion; I am a contrarian in pretty much every aspect of life. Given the vast number of individuals in the market, you will always be able to find people who buy and sell at exactly the bottoms and tops but this is more luck than skill.

On another note: when rampant inflation caused by the central banks running their printing presses at maximum capacity kicks in, anyone holding cash is going to be screwed. At least I'll own some productive capacity.

The S&P 500 is trading at 17x earnings and the DJIA is trading at 11x earnings. Add in the very reasonable dividend yields that many of these stocks are throwing off and you have some attractive investments. If I had the time to study these things I'm sure I could find some incredible values and make excellent returns, but since I don't have that time the best I can do is buy the whole market.

If I wasn't confident in the fundamentals of the U.S. economy then I'd be living somewhere else, wouldn't I?

[snark]Have you been drinking the "I can time the markets" kool-aid?[/snark]

Therein lies the problem. Cash is vulnerable to inflation but it preserves absolute dollar values while equities are, long-term, protected from inflation but, at least until recent events, have been greatly overpriced. Further, normal educated investors are going to have difficulty assessing accurate valuations for individual equity securities...much less projecting the actual bottom (which is likely to be lower than the fair valuation price but could be higher).

Meanwhile, it's difficult to tell if "value-preserving" items like gold are fairly priced. I don't know enough about precious metals or even monetary policy to know if precious metals remain more desirable than cash. It's entirely possible that precious metals prices remain unhinged from the current monetary situation.

If earnings growth is zero or negative, then 17x earnings is still a piss-poor investment for an equity investment. That would be 6% at zero growth or less with negative growth and that's not enough to keep up with the printing presses, much less grow wealth (as opposed to just growing dollars).

11x earnings is markedly better and is certainly a worthwhile investment if no better options are available since 9% is fairly reasonable.

Now, I'm not saying that 17x is always a bad buy. In fact, it can be a great buy if you expect good earnings growth.

The basis of decision at this point is whether or not you believe that the fundamentals of the global economy will provide the proper atmosphere for such earnings growth.

I believe that there are great buying opportunities emerging, but that those opportunities are much more limited within the U.S. markets as opposed to certain international sectors. You obviously are retaining faith in American supremacy, but only time will tell.

How is buying the whole market better than buying a sector fund?

Finance is dangerous as hell to own right now, and if you don't have time to study it and can't be nimble with trades, I'd avoid it entirely.

i checked my portfolio today!

total i have bought in for is £38,450 over the past 6 months or so, now stands at approx £31k (approx as need to get new password for one of my accounts).

so a 18% fall. not great.

i invest 35% in equities, half is china and half is managed global equities.

the managed global equities fund is 91% cash, 5% short euro stocks and 4% long china. this is the most bearish ive ever seen it, over last few months its been only 70% cash, 30% long.

really need a rally in oil and gold.

fwiw my portfolio is:

17.5% china fund
17.5% global growth
25% conservative commodity etf (can short and long)
10% long-only commodity etf
10% agriculture etf
12% natural resource funds
8% gold fund

this makes up 24% overall, with another 76% sitting in cash. want to buy more though, commodities looking cheap.

76 percent cash in your 20's? Wow. Sure the market can go down.. even another 50 percent.. not gonna be able to retire with the interest from a savings account tho.

it mainly because i wouldnt feel comfortable having more than £30k - £40k invested. a 25% downswing from now would cost me £7k - £10k, and my annual post tax salary is only £20k or so.

also, another reason is that this means i have £100k sitting in cash, which it's saved away for a house deposit when the time comes. its poker winnings i dont want to risk losing, though with Gordon Brown borrowing up to his eyeballs this is getting worth less and less. Gordon Brown has a huge complex over being disliked imo. Seeing Tony Blair being liked for so many years, now he wants to be the same. Also as Chancellor for 10 years, he doesnt want to be proved that he made any mistakes. He will do anything to prevent a recession, which will only make it longer and deeper and devalue our currency even more. I'm just hoping all of it is already priced into GBP.

This is an excellent point that goes over the heads of uninformed investors: when you agree to not sell your stocks until a certain date, you're for all intents and purposes, playing poker with your cards face up.

I don't believe it's an accident that the market crashed on the same year that the first crop of baby boomers is about to turn 60.

To be fair, the people who are calling sellers "idiots" are saying it because they are speculating that the sellers will miss the recovery. While I agree with you that the fundamentals of the U.S. economy are crap, and that the government actions in response to the market crash are not encouraging, this doesn't seem like a good reason to sell all your equity and buy treasuries or money market funds (which is what a lot of the scared money is doing). It seems to me that a smarter approach is to underweight the US in your portfolio, or maybe take a long position in bonds with your equity. The people being called "idiots" are those that sold equities after a 30-40% decline and bought treasuries, with the intention of buying back in without giving any intelligent description of when they will buy back in.

I think that ignoring your 401k is a big mistake. I understand the objective of avoiding emotional reactions, but ignoring your retirement funds is a sign of a major underlying problem with your retirement savings plan. If you are saving money for retirement, you should have a dynamic investment plan, not a static investment plan. If your plan is to direct your funds to your account, select your investment option, and then ignore it until you're close to retirement, then you've got a static plan. A static plan is an invitation to not be able to retire when you want or have the retirement lifestyle that you want. If you have a 401k, or any kind of retirement plan, you should have:

- a clear retirement income objective;
- a clear strategy with a contribution level and expected investment return that will build up to the retirement income you want; and
- a plan to change the plan when you have to because past investment experience or other factors change your outlook

The earlier you identify factors that make your prior plan no longer work (like a 40% drop in equities in a given year) then the easier it will be to adjust your strategy to get back on track.

Not only is it not an accident but the next 18 years are going to be quite a demographic headwind for the broad market indices as the baby boomer mutual fund withdrawals are sure to accelerate.

The bull market gains of the last 25 years were fueled in large part by the massive growth in the mutual fund industry. Investors who have been burned will be hesitant to reenter the market. More sophisticated investors realize mutual fund companies made significantly more money for themselves than for their clients.

People who work for a living and do not have time to nimbly trade their money may eventually realize that the game is stacked against them and exit altogether.

Are you saying the buy and hold entire stock market strategy is an incorrect strategy then? Should I just get out of the market altogether, if I don't know how to invest?

Buy n' Hold is not a bad strategy, per say. But, in the case of a 401k, you don't have an escape hatch in case of a crash. Obviously, the most well known buy n' holder is Warren Buffett, but, even he recently admitted to being 100% gov't bonds in his personal account.

That said, some 401ks have options for money market funds, so, you could've switched over before it really hit the fan.