|Click To Enlarge|
Do I think we are headed lower? In the short term, yes. It doesn't make a whole lot of difference in my case. I play a trend until it ceases to be one. So, even while the longer term trend may be down, there could be opportunities for me to take advantage of a shorter up trend. For people with a longer term investing horizon, the decision as to what to do is more complicated. In 1998 I had a rather large (for me) pension adjustment which I wanted to invest. I put the whole thing into a good mutual fund at the beginning of the year. By the fall I had lost almost one third of my investment. Nobody had suggested to me that was even a remote possibility!
Based on my experience, I would not invest any of my money in mutual funds today. Mutual fund managers will try to minimize losses in a down market, but they cannot avoid them. For the longer term, I would only invest in a broad index based Exchange Traded Fund (ETF) like XIU and watch it very closely. I would set a maximum daily, weekly, and monthly loss limit and sell if I attained any one of them. I would only try to reenter the market once the market direction regained an upward trend. The problem with this approach is my portfolio could end up dying a death of a thousand cuts - enter the market, lose, sell, enter the market, lose, sell... . Since I have little faith in the longer term, what I would most likely do is shorten my investing horizon to a much shorter term.
I am not an investment professional, so I cannot advise you in what to do with your money. What I would recommend is being very careful. History would seem to indicate things could get a lot more worse before they get a lot more better.
Do you think we are currently in a new bull market?