CHESSNOID

I know the stock market really tanked today. If you asked the experts a year ago where they think the market would be, most of them would have guessed wrong. Remember back in October 2007, the stock market hit all time highs:

DOW 14,093 on Oct 12,2007
S&P 500 1,561 on Oct 12, 2007
Nasdaq 2,810 on Nov 2, 2007

Today, the markets are closing in on 50% off those numbers:

That is what makes it hard to be an investor. If you had picked the right stocks and diversified, then you should have minimized your losses.  In this economy, every sector and industry has been killed.  So even those 2 defensive tools do completely protect you.  I think if you have been dollar cost averaging, that may have helped bring your cost down dramatically as long as you have been consistent and never stopped buying.

I sold my stocks in my  401k, IRAs, and personal broker accounts a few months before the October 2007 high.  At the time, it was difficult to watch the market continue to go up when I was all cash.  Especially since I had been a consistent dollar cost averaging investor for the last 6-7 years prior.  Literally, the markets looked irrational to me.  At that time the market moved 1-2% daily and everyone was so giddy in the money they were making.  That’s what convinced me the market was coming back to reality.

We can certainly say for certain now that October 2007 was the top of this stock market cycle.  The difficult part is predicting the bottom of the cycle so we can start to invest with confidence again.  We are in a recession now but even when we get out of it, the markets may not catch up as fast because so many people were hurt in this crazy downturn.

I believe that stocks are very cheaply priced.  The only issue for me to get started buying in again is that I think we may still go down another 10-15% in the next 6-18 months.  I hate to try to time the market because it is impossible, but until I get that same feeling that told me to sell that it is now time to buy, I will have to hold off and sit on the sidelines.  Last week when the markets went up 10%, I was thinking did the market hit bottom and I missed it?  There is a real risk not being in the market because big gains can be made in a day, but I think it is more riskier to lose any of your capital at this point.  Negative 50% returns is very disheartening.