Why I Am Still in the Market
This New York Times article captured my sentiments accurately. At least two times, in the past week, I have been tempted to cash out of the stock market “just until things settle”. I stress the word “tempted,” because I did not give in to temptation.
The article as well as this NPR story are consistent with a rule I follow: Do not try to time the market. It doesn’t matter that I follow indicators of uncertainty like the TED spread. Credible experts including Warren Buffett espouse this philosophy—and those who reject it have not proven credible.
Of course, it always helps to have a personal, visceral experience for moral support. Mine involves a particular stock that had declined 5-10 percent in a few days. Acting out of fear, I put in an order to sell it. The order went through, the company announced earnings, and the stock was up 20% the next day.
I expect that this financial crisis may be the opportunity of a lifetime.
My methodology does require re-balancingĂ‚Â when a more optimal portfolio is available, so I have moved money around, but I don’t do this very frequently lest commission costs eat into my returns.