Monday, October 27, 2008

I've Been Busy

With markets around the world declining further by the day, I've been very busy at work and unable to post much recently.

Markets have fallen further and faster than I've expected and I suppose that shouldn't be a surprise but this is clearly presenting a once in a lifetime buying opportunity in equities for those with cash on the sidelines.

Here is a list of the best things you can do right now to position yourself for future investment success:
1) Stay true to your personal risk tolerance. Now is not the time to mess around with your overall risk level unless you can devote more to equities. Be honest with yourself about your risk tolerance. Can you handle a 10,20,30,40+% decline in your investment value?
2) Set up a systematic investment plan and contribute as much as you can afford to a portfolio that matches your risk level.
3) Develop a plan to meet your goals if you don't have one. Be realistic about your return assumptions and your lifestyle needs.

As always you should pay off unsecured high interest debts before you invest a dime.


Montery said...

Yes, totally agree. I made the mistake of buying into the market literally a day before the crash started.

Now I'm sitting on the sidelines, watching a few favourite investments. One of them, Barclay's Bank, I keep lowering my target as it crashes through. I bought at 24, then again at 20, and now it's down to around 14. I will buy again at 10 if it reaches that low, and certain will buy again at the end of November.

Other stocks I'm watching are mostly the Canadian dividend stocks as I want to position myself so that I can weather a loss of job without an equivalent cessation of income. Ultimately the goal is to set up a cash-flow retirement scheme where I won't care much about the fluctuation of future stock prices.

Oh yeah, and I wanna set this up so I can take advantage of it in 10-15 years. :)

jesse said...

One must wonder if the forward looking earnings are still a bit too rosy. What will PE ratios really be in '09 and '10?

John Collison said...

Now is no time to buy into or back into the stock market. It has a looooooooong way to go yet.

We need P/Es of 3 before the ascent can commence again, likely in 2011.

Buying stocks now is like buying real estate again in 2007 after that market had only just begun to slide in Canada.

solipsist said...

As always you should pay off unsecured high interest debts before you invest a dime.

Sage advice, mohican.

I too believe that this is just the beginning. There is a great cleansing under way.

e8005 said...

Mohican, you seem to have been bullish on stocks for a few weeks now, despite the persistent downward trend. Question: do you think it's a good time to buy for everyone, or just millionaires/billionaires, who can afford the risk?

westygrrl said...

I've enjoyed your blog for a few years now (post-VHB blog demise). I also visit your regional links frequently and enjoy the different topics and discussions there as well. I appreciate your viewpoint, advocating for prudent personal financial management, as this is what we've tried to do with our own family.

That said, I'm interested in where you think this 'once in a lifetime' situation leaves us. How is it possible to reconcile getting out of this mess by accumulating even more debt- either as governments or individuals? I don't understand the math on how the credit reckoning can be further postponed, unless there are other forces at work?

And where does this leave those of us who do have our financial house in order, and have worked hard to keep it that way? What would you do with your money?

Unknown said...

Will people please (excuse the rudeness) shut the hell up already about this being a "buying opportunity"? Please do yourselves a favour and stop watching CNBC and MSM.

I've been hearing that ridiculous advice as we went from 14,000 to 12,000. From 12,000 to 11,000. From 11,000 to 9,000, and then at 8,300.

Don't think for a second that this 900 point Dow rally today is a long term buy signal.

The world is fucking falling apart. A new country is added to the IMF bail-out list every other day, and you think the stock markets will recover?!????


If anything this wave 4 (to quote Elliot Wave theorists), is your last chance to get out and sell at a lower loss.

Yah you may see the markets (Dow) make it to 10,300 if you're lucky, but then watch the currency crisis blow up. Watch corporate bonds crash. Watch the US dollar do a reversal so fast your head will spin.

Wave 5 will bring the Dow to 4,500, and your "investments" to the brink!

Then inflation will come.

Book it down. BOOK IT HARD!

tulip-Mania2 said...

Tick Tock, Tick Tock

mohican said...

Risk mitigation is the name of the game with investing. You have two risks regarding the stock market today:

1) The market continues to go down rapidly so any money invested today is worth even less in the short term.

2) The market turns around and rises dramatically and never comes back to these levels again. This has happened with every single recession in the past century. We just can't tell when the bottom is.

I see these options at this point as being of fairly equal probabability so I'm not definitively saying that now is the best time to buy stocks. I am saying that it would be prudent risk mitigation to hedge your bets.

Personally, I'm investing aggressively right now.

That said, I also have other insurance if the wheels really fall off the system and we are really in trouble. EG - canned food, guns, ammo, water, precious metals, etc.

Be prepared to be wrong for whatever your point of view. I am, are you?

Additionally, I'm not terribly concerned about the end of the world. In fact, I'd welcome it.

kopyright_klepto said...

I think Mohican is right on with this one. Stick to your financial plan and risk tolerance, now is not the time to waiver.

Based on my investment strategy these market dips are indeed an opportunity for long term gain. I know I can't time the market, so I don't even try. I buy the same mix of funds every two weeks as a fixed % of my family's income. Lately, these purchases have become "cheap". The more "cheap" buys I get, the better my market timing is when I look back on things 20 years from now.

If I didn't have a 20+ year time horizon, I'd have a very different risk profile and would have less exposure to these fluctuations. But for now, a weak market today is nothing to complain about when I start to cash out for retirement in 2035.

On the other hand, my "house" fund is safe in high-interest savings and bonds at the moment. I figure I have another 18 months before I buy back into the market. Similar to my other investments, I believe this fund will be "worth" more by the time I intend to use it.