Question about whether to still invest money in the stock market

[W_HAMILTON]

I'm still pretty much a novice when it comes to the stock market, and only recently got into it last year, right around the early summer times when things were going well (that's my luck!).

Well, at the start of the year I moved a couple of thousand dollars from my savings account into my roth IRA, since it was a new year and the cap was reset. Well, everyone knows what has been happening with the stock market lately. I put off on even looking at the balance, until today, when I realized I lost about $500 off of my actual investment.

So, the question is this...do I keep contributing to my roth IRA (which I do so around $200 per paycheck, or $400 a month), or would I be better served just putting that back into my savings account and waiting for things to at least look a little bit better? I know that a lot of people around here are wary of all things stock market and of course would tell me not to put a dime into Bush's economy, but I'm looking for a little more rational reasoning.

Should I continue to max the contribution to my roth IRA, and hopefully benefit in the long run because my money buys more shares since the price has dropped off, and when they go back up I'll have more shares since I continued buying them even through this possible recession? Or should I just put my money into a savings account instead, and wait to max my roth IRA contribution until there is at least some hope in sight?

Right now, I don't really anticipate the stock market doing very well or rebounding since there seems to be no good news out there. But I don't know whether it's better to keep putting money in the stock market, realizing I'll lose short-term but should gain in the long-term, or just go with my savings account and at least not lose anymore money for now?

[NMDemDist2]

1. how old are you and can you keep part of the Roth in a Money market?

my hubby just changed jobs and he has matching funds from his new employer in a mutual fund company.

I'm gonna hold off until summer or fall and sock cash away (money managers say you should have 6 months living expenses in a savings or money market account anyway)

I think right now is not a good time to jump into the market and those CDOs are everywhere, it's almost impossible to find a fund that doesn't have at least SOME exposure.

I'm not a money manager by an means, but that's what I'm thinking right now.

YMMV

[W_HAMILTON]

4. I'm 27

And I went with a Vanguard roth IRA, one of the ones targeted to when you retire, so it's pretty much hands-off for me. All I do is contribute money to it, and it automatically allocates everything.

I also have a 401k, which I will continue to fund like usual. I have a little more say in what I can pick in the 401k, but I basically set it up as a "risky" investor since it was suggested since I was still relatively young and far away from retirement, but I don't know enough about the stock market as a whole to pick and choose funds from what it listed.

I plan to continue to save at regular intervals like usual, but I don't know whether I should keep throwing money in my retirement stock market funds, knowing that the worse is probably yet to come, or put it away in a savings account for now until things look a little better. I guess it sounds obvious when put like that, but at the same time, I look at a lower stock market as a way for me to load up on shares at a cheaper price, which in the long-term would be beneficial to me.

But I'm torn, so I don't know what to do :(

[NMDemDist2]

5. you are so young, I'd keep funding it. you're correct about getting bargins

:hi:

just make sure you are out of debt and have the 6 month living expenses in a liquid account first

as for your 401, move some of it to offshore funds invest multinationally

[W_HAMILTON]

7. OK, thanks for the advice

I pretty much out of debt, and while I did kind of ravage my savings account a bit to go ahead and fund part of my roth IRA contribution for this year, I have a few long-term bills that I only have 1-2 months more of paying off, so I guess I can use some of that money to build back up my savings account.

Thanks for the advice!

[Joanne98]

2. My advice. If you're going to trade do it yourself...

It doesn't matter if the market is going down, you can make money buying Put Options. The only thing I can see to hold long term is gold and oil. It looks like every else is going down. Chinese stocks were hot last year. Brazil and India may be hot this year. You can buy them with ishares. I wouldn't hold things over a year for the tax break though. It's a big mistake to make yourself immobile when the electronic herd moves like the speed of light. You get left sitting there while everybody else leaves with your money.

[W_HAMILTON]

6. Yeah, but that's the problem

I don't know that I have enough time to get involved that deeply in the stock market. I certainly realize there are still plenty of opportunities to make money in any time of market, but I definitely don't have the know-how to do that just yet. I really only got involved in the stock market in the past year.

[SlowDownFast]

17. If you believe this is a bear market

and will remain so for some time, consider 1X or 2X inverse ETFs (short ETFs):

www.proshares.com

DO NOT PLAY OPTIONS if you're a novice. You will lose your money.

I don't think you can play options with a Roth account anyhow.

[A HERETIC I AM]

18. There are no restrictions to using options in any kind of an IRA

Since they are "self directed", the IRS could care less how or what you invest in inside those accounts. Certain assets can not be held or titled in such accounts, for instance Collectibles, (Art, coins, stamps, baseball cards) Metals, Real Estate and Life Insurance. Custodians may place other restrictions as well.

But you're right, Options are not for the novice.







Edited for clarity.

[Warpy]

8. Careful with those Chinese securities

China is just one natural disaster away from another revolution.

Their crisis of maldistribution isn't being addressed, either, and it will cost them.

On edit: I agree about the oil but not about the gold. Certificates have been sold several times over and holding the shiny rocks themselves becomes problematic in a country full of thieves. Safety deposit boxes can be raided by DHS if Stupid declares any sort of national emergency, a very real threat.

[A HERETIC I AM]

9. You're suggesting an admitted stock market neophyte trade options?

Is that really prudent in your opinion?

His first sentence in the OP is

I'm still pretty much a novice when it comes to the stock market, and only recently got into it last year

This is not someone who should even THINK of trading options contracts.

[gravity]

11. DON'T BUY OPTIONS

Unless you are an expert on the markets, don't buy them. Even if you are an expert, you shouldn't touch them.

Chances are that the hedge fund selling them to you knows a little more about the markets than you do.

[Joanne98]

3. You could practice with the Investopedia game.. Here's the winner's portfolio

Option Portfolio Serious Investors Only - (Get a Free Educational Options Booklet)
Symbol Description Qty Purchase Price Current Price Total Value % Chg Gain/Loss
TIE AG 2008/01/19 call on TITANIUM METALS CORP at $35.00 50 $4.60 $0.00 $0.00 -100.00% -$23,000.00
UWV AD 2008/01/19 call on NVIDIA CORPORATION at $20.00 75 $4.40 $16.90 $126,750.00 284.09% $93,750.00
UKO AE 2008/01/19 call on DENDREON CORP at $25.00 25 $6.40 $0.00 $0.00 -100.00% -$16,000.00
KRY AU 2008/01/19 call on CRYSTALLEX INTERNAT CORP at $7.50 75 $0.85 $0.00 $0.00 -100.00% -$6,375.00
WNM AW 2008/01/19 call on GERON CORPORATION at $17.50 75 $0.65 $6.89 $51,675.00 960.00% $46,800.00
YZU AJ 2010/01/16 call on BIOGEN IDEC INC at $50.00 75 $3.90 $17.20 $129,000.00 341.03% $99,750.01
APV AF 2008/01/19 call on APPLE INC at $130.00 15 $15.80 $31.10 $46,650.00 96.84% $22,950.00
RFY AP 2008/01/19 call on RESEARCH IN MOTION LTD at $80.00 40 $11.50 $8.50 $34,000.00 -26.09% -$12,000.00
WNM AV 2010/01/16 call on GERON CORPORATION at $12.50 70 $1.35 $0.70 $4,900.00 -48.15% -$4,550.00
WTK AW 2010/01/16 call on DENDREON CORP at $17.50 55 $8.50 $1.90 $10,450.00 -77.65% -$36,300.00
MA AF 2008/01/19 call on MASTERCARD INC CL A at $130.00 100 $15.80 $44.30 $443,000.00 180.38% $285,000.00
GOP AO 2008/01/19 call on GOOGLE INC A at $500.00 25 $43.00 $99.70 $249,250.00 131.86% $141,750.00
DQR AZ 2008/01/19 call on DRYSHIPS INC at $120.00 25 $22.80 $0.00 $0.00 -100.00% -$57,000.00
MNZ AQ 2008/01/19 call on 3M CO at $85.00 175 $6.10 $0.00 $0.00 -100.00% -$106,750.00
Total: $1,095,675.00 39.06 % $428,025.00

Shorted Stock Portfolio
daustin currently has no short in their portfolio
http://www.investopedia.com/

He mostly trades call options

[gravity]

10. Keep on contributing to your IRA even in bad times

Chances are, you are apart of the 99.9% of folks who can't time the market, so don't bother trying. We could be at the bottom as far as anyone knows, which is the best time to buy stocks. When the average investor tries to time the market, they often buy high, and sell low which is the opposite of what you should do. There have been studies that show that the less peope trade and try to time the market, the better their performance is.

When the markets down, you can buy more assets for the same amount of money so take advantage of it. You are averaging your costs basis down, and as long as you don't invest in very specualative assets, you will be fine in the long run.

With an IRA, you are investing for the long term and the stock market will eventually recover. Five years from now, after having a Dem in office for four, you will be glad you got in during the Bush economy when everything was doing so bad.

[Warpy]

12. If you've maxed out your contribution to your IRA

how about putting it in insured CDs, Tbills, or insured municipal bonds? The word here is "insured."

If the market does as poorly as most of us expect it to do until Stupid is gone, you'll be ahead of the game and have more to invest at bargain prices when we get rid of the GOP.

That's what I'd do with only a very modest amount to invest.

I'm already in the market and living off dividends and interest, so I'll probably stay there. Cashing out and stashing it in an account in Switzerland wouldn't give me adequate income.

[AdHocSolver]

13. If you buy stock when prices are on the down swing, you just lose. Warpy's advice is the best.

What you refer to in your last paragraph is the technique of buying more shares in a stock that you bought when it was high and saw the price drop. However, that only works to average out the lost asset value if you wait until the stock price bottoms out and starts to RISE again. Otherwise, you could be buying stock whose price never goes back up.

Most savings accounts are paying very little interest (at least in my area). Warpy's advice is best. I would recommend short to medium term INSURED CD's. When they come due, you can always take the money out and buy some other securities with the funds.

Now is NOT the time to get into the stock market. In the meantime, you should learn more about how it works. In any event, to really understand the stock market, you should learn how a Ponzi scheme works. Try searching for it on wikipedia.

[chimper]

14. It's all down hill now.

We are in a multi year bear market and the trend is DOWN.

[nightrider767]

15. I wouldn't buy into the stock market now...

It's a bear market, going down.

Is that bad? No. That's good.

It's not the first time the market has declined. Now's a good time to keep your money on the sidelines and do research. I've found one of the best sources of info on basic trading techniques is Investors Business daily. They even have a book to go with it. A#1.

Anyways, but don't stay out forever. FInd the best best companies, in the best sectors, that will lead this economy out of recession and at some point buy. The key is to buy in before the market recovers. So don't wait too long for the bottom.

I like Apple. I don't own it now, but I will. It's the leader in innovation and quality, that puts it's competition to shame.

Don't listen to me though. Do your own research. It's can be fun. Pick 5 great stocks,, hold them and enjoy the ride.

That's my take on things.

But with the stock market, there are plenty of other good approaches.

Good luck.

[onbudsman]

16. arguably, we've been in a bear market since 2000

since *adjusted for inflation* the value of what you could buy with liquidated funds from the stock market has never exceeded the March 2000 top, not even close.

in a *real* bull market, what you could buy with liquidated funds makes real new highs, even adjusted for inflation, it's not just an illusion

a bear market beginning in feb 1966 lasted until 1982, and adjusting for inflation, may have been even longer