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It's Time To Time The Market?

Saturday, October 20, 2012 - 9:39 AM
As described in this WSJ article, trying to time the market rarely works over the long-term. However, in today's environment with both stocks and bonds being overvalued, increasing the percentage of cash in your portfolio may be reasonable. One Excerpt:
Mr. Smithers suggests lowering stock and bond exposure, and holding more cash instead, even though short-term interest rates today are below inflation. "People underrate cash," he says. "The point of cash is to avoid losing money."

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If you're going to keep cash in your portfolio, internet savings accounts, CDs and/or reward checking accounts make much more sense than money market funds that pay less than 0.05%.
5
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,664
1. Saturday, October 20, 2012 - 3:07 PM
I disagree with the approach to reduce stock/bond exposure at the present time.  On the contrary, one should increase the equity coverage once we are in late october/early November due to (1) favorable seasonality factor, and (2) upcoming presidential election.

But do not bet on Mr. Smithers or 51hhma because both of us cannot predict the market behavior with 100% confidence level.

The prudent approach is to have an asset allocation and fund diversification that allow one to sleep at night.  Then adjust it "modestly" according to ongoing market trends.

I am still a firm believer of RCAs until the rate drops below 3%.
4
51hh51hh1,460 posts since
Jan 16, 2010
Rep Points: 6,348
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