Anyone with a 401K or any other managed retirement portfolio
has seen its value drop significantly in the past few weeks.
Calls to the manager almost always have the same reply. “This
is only a correction.” “Don’t worry. The market always comes back.”
or some other ilk.
And your money continues to disappear.
Almost without except all mutual funds are required by their
charter to be fully invested at all times. Unfortunately, there are times
when there is nothing to buy and the fund manager’s hands are tied
because he is not allowed to sell losing stocks.
That doesn’t apply to you. Or does it?
As the investor you may direct the fund manager to sell and put
your money in a money market account. For the past almost four and
half years the market has continued erratically, but steadily up. There
has been no reason to sell.
Things have changed.
Now it is time to move out of stocks and into cash. Cash is a
position. No broker or fund manager will agree with that as he can’t
make any money unless your account is invested in stocks or mutual
funds.
As far back in stock market as anyone may care to search during
any 10 year period there has always been a major correction. Some of
those “corrections” have wiped investors out. The 1929 “correction”
took 25 years to come back. Do you have that long?
How do investors know when to sell? Brokers and financial planners
won’t tell you as most of them don’t know. Yet it is relatively easy so it is
up to you to protect your money.
Their is an excellent indicator that is published every day in the
newspaper Investors Business Daily. You don’t have to buy the paper.
You can look at it in the local library.
In the second section you will find a chart called the Investors
Business Daily Mutual Fund Index. The chart shows an index of 24
major mutual funds. There is a dotted line called the 200-day mutual
fund average. For the last almost 5 years this line has been going up.
It turned up in April of 2003 to give a BUY signal. It has recently turned
down. That is the SELL signal for the entire stock market..
Any investor can check the major indexes such as the S&P500 or
the DOW using these figures on http://www.bigcharts.com .
Smart investors to protect their savings will now instruct their
fund managers to Sell everything and put it in money market
account. Of course, much will be done, but money will not disappear
Rates of 20, 30, 40% or more, as it was in 2000. Smart Investor
wait for the moving average line, in turn, before buying in.
401K risk falling 50% from here. Reasonable
The investor must have a plan to protect their money.
Protect. Sell now.