Can someone answer a question about the 2008 economic crisis

[Milly]

That isn't true. Plenty of people continued to trust and invest in the market. I did. The crash didn't change my investment plan one bit. I continued to add to our Roths and other accounts the same as always. When prices dropped, we were able to load up on more shares for less money which made us even more money when the market recovered. The only people who lost money were those who panicked and sold after the crash.

The prices didn't just drop on their own. People sold which caused more people to sell (by choice or margin calls). It was a hyperbole to say that no one trusted the market, but obviously many people didn't at that point.

Trying to time the market is a fool's game. She probably missed out on thousands or tens of thousands of dollars of potential gains by leaving the market when she did.

You are probably right, but it sure makes me nervous. I'm okay reducing my holdings two years early (especially if I can find something that tracks inflation as I wait) as long as I can get back in on the rebound. There's obviously no way to know how early you are, but I figure we'll have a correction within 2 years. If not, at least I still had 30% in stocks (or whatever we end up compromising on).

Maybe I'm not ready for this investing thing.

[disneysteve]

I figure we'll have a correction within 2 years.

Lots of "experts" have been saying that for at least the past 2 years. I suppose eventually they'll be right.

If you invested $10,000 3 years ago in a Total Stock Market Index fund, you have earned an average annual return of 9.58%. That means today your account is worth a little over $13,000. If the market drops 20% tomorrow, you'll still have $10,500 which is a couple hundred more than if you pulled your money out 3 years ago and put it in a "high yield" online savings account waiting for the correction you were "sure" was due.

Your asset allocation should be based on your goals, your time line, and your risk tolerance. It should not be based on current market conditions or your predictions of what will happen next.

[97guns]

Your moves should be based on gains and losses, nothing wrong with taking gains off the table, at minimum take your principal off the table

[disneysteve]

nothing wrong with taking gains off the table

Absolutely. The question is why you are doing it? If your research has led you to believe that the future prospects for that company/fund are different than they were when you made the investment, growth has slowed, management has changed, new regulations have been instituted, etc., then it might be time to step back.

If, however, you are selling off your equity holdings because you think "the market is overvalued" and due for a crash, that's little more than market timing.

[msomnipotent]

I used to get questions like this from my sister and her coworkers a lot. "They" are saying that you lose the money in your 401k if you don't log into your account at least once a year. "Someone" said you pay a tax if you stop adding to your account". I heard "they" take away all of your 401k after 5 years if you don't add to it. These were grown adults in the 40 to 60 yo range, not just some newbies with questions. I have even asked her how does any of those rumors make sense to her, and she didn't know. If it sounds too odd to be true...

Absolutely. The question is why you are doing it? If your research has led you to believe that the future prospects for that company/fund are different than they were when you made the investment, growth has slowed, management has changed, new regulations have been instituted, etc., then it might be time to step back.

If, however, you are selling off your equity holdings because you think "the market is overvalued" and due for a crash, that's little more than market timing.

"Why are you doing it" is a good question to figure out the answer before you buy or sell. I trade on one account quite frequently. Why? Because I want to make money now, and you don't have any profits until you actually sell. I have other accounts that are on "set it and forget it". The most I do with those are rebalancing once or twice a year and maybe change the allocations to more conservative or risky once in a great while. I never pay attention to "the market" as it really doesn't have any bearing on what my individual stocks are doing.