Take the money and run? Or sit tight?

money and run

I’m getting pretty sick of watching my retirement nest egg dwindle away, so I called my financial advisor yesterday and hinted I might like to dump my mutual funds.  They are eroding my portfolio like the Mighty Mississippi is gobbling up Louisiana.

While investors weighed the likely impact of the Obama administration’s massive $790 billion economic stimulus bill and considered how Secretary of the Treasury Timothy Geithner’s Financial Stability Trust might restore order to the nation’s financial sector, the economy as a whole continued to churn, sending the Dow Jones under the 8,000 mark!

Yikes.  I can’t look at the news any longer.  Too depressing.

Raymond James’ Chief Economist Scott Brown suggests that the uncertain investors tend to rush from “one side of the boat to the other,” depending on the perceptions of the hour. In the process, he said the positive aspects of the government’s action can be overlooked or dismissed without due consideration. (I guess that means I’m on the wrong side of the boat.)

Geithner’s framework does promise more financial institution accountability than was applied in the original TARP (Troubled Asset Relief Program) legislation in October. Well, it’s about time!  I can still see all those fat cat bankers partying down at the Super Bowl on our dimes while we were sitting at home eating black eyed pea caviar and popcorn.

Nevertheless, the savviest analysts caution that even if all these measures live up to their promise, there is no overnight miracle in store.  Even investing in state and federal “shovel-ready” infrastructure projects – to boost employment and inject demand into the economy – isn’t an overnight cure. Brown suggests results are not likely to be visible until the second half of this year, or even into the first half of 2010. Notice how they keep moving the finish line?

Historically, markets have emerged from recessions with strong gains, leaving aside those who left their assets in safe but low-reward savings or fixed income investments. That may be true, but the current situation blind-sided us all and is breaking all the rules. What if the stimulous package doesn’t work?  Could the Dow dip back down to the 5,000 range?  I cringe at the thought of what that would do to mutual funds.

I’m meeting with my financial advisor today. I’m going to suggest taking those mutual funds – what little is left – and putting it into a reward checking account that is paying 4 percent on deposits up to $50,000. I should have done it two month ago. Many commercial banks are offering these perks and I think they are great so long as you can exercise a little self control and not let a big checking account balance entice you to buy _____________ (you fill in the blank).

There are some stipulations on these “rewards accounts.”  At my bank you must have at least 10 withdrawals – either automatic payments or ATM transactions.  But that nice little interest deposit at the end of the month is well worth it.

I’d like to know what you are doing with your investments.  Casino, anyone?

2 thoughts on “Take the money and run? Or sit tight?

  1. Emily,

    I’m leaving “as is” although I did purchase a very small amount of a big title company stock (trades on the big board) about half of the price it was a year ago which was supposedly $35/sh. Think it was more like $12 when I bought it. If I’d purchased it when the bottom fell out back in November, at it’s lowest, I could’ve gotten it for $5 something.

    I don’t plan to keep this forever like I’m doing with everything else, however. Just figured I could pay for this year’s respite trip after it goes up to where I can make a little profit over the commissions and purchase price. It’s not going to be a very long trip…just an extra long weekend to a nearby beach.

    Reason I picked this one was that I figured no matter how it goes, houses are going to exchange hands the way things are going — either through forced sale or enticement to buy through some tax credit.

    This stuff became available at such a slow rate when I called with the order that I had to wait for the second batch to even be able to purchase the second part, so that was about 4 cents different in price/share by that time.

    I don’t know what it’s been since I bought it, but I need to start keeping up with it. My target price to sell is NOT back up to $35, so I’m not going to be greedy on this one, just to be on the safe side — just to make the purchase profitable. Can’t afford to take any chances. It doesn’t pay any dividends — this is just my Vegas money, but it is a good, sound company, not a gamble, really. Matter of fact, I know the family that runs the company — have all my life. Very ethical, honest folks. Who knew that little company would ever be on the NYSE!

    Know what you mean about the funds seeming to take the biggest drops — mine look just like the Dow to me. I did better in terms of the bottom, on big name “safe” type stocks I own a few of individually.

    My little bit of computer stock continues to roll on — I’d bought it when it was VERY low a few years ago, and then, it took off, so I’m not feeling that sting nearly as much as the others. It was the classic buy low, sell high, but I can’t bring myself to sell it now since it’s riding this thing out so well.

    I’m hoping that my little bitty funds will bounce back with the economy, and besides, we’ll eventually get into stagflation when they start having to print money to pay for all this “stimulus”, and that will make it better not to be all in cash, unless I’m mistaken. Maybe someone can correct me on that, but I think it’ll just be better to have some real assets rather than cash when it starts to shrink. That way you have something with real, rather than relative value. Anyone have in other ideas as to what to put cash into now?

    I was sooo scared when the automobile company’s, er ah, lending institution’s bond values started to drop out of oblivion. A ten thousand dollar bond was, at one time, valued as low as 1,500, maybe lower. Thing is that they were paying around 6% of face value, and still are.
    It bounced up to 3,000 after the first buy out, and about the time these outfits were allowed to be FDIC insured…think they’ve become banks. Anyway, whatever it did, the value of the bonds went up. I just want them to last a few more decades til they mature at face value, and meantime, the 6 % ain’t bad. Probably wouldn’t have gotten anything out of a bankruptsy, and that still could happen in the coming decades.

    When I heard the politicians saying we’d have been so bad off if our social security had been put into stocks, I was thinking that I’d STILL be better off had I been able to take my money put into SS all these decades, and put it in the market. With all the growth back in the 80’s and 90’s, even with the resent market downward spiril, I’d STILL have more income than now. I think that would be true in the future, unless of course, we turn into another banana republic which is where it looks like we’re headed right now. Maybe we can turn it around in the next two years — hopefully so!

    Anonymous

  2. Very interesting Nancy. You’re way gutsier than I. So give – what’s the name of the (vacation) stock – I might check it out.

    I left my funds where they are too. I did take what she had in cash and put it in my checking account to draw 4 percent interest – promised her I would put it back incrementally with dollar cost averaging once the market picks back up. We can all hope, can’t we?

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