Investments not doing well...what to do?

[ludawg23]

Hi all,

I just wanted to see if you guys had any advice from me.

My wife and I do well and we are pretty comfortable.

I convinced my wife to invest 10K of our savings that we did not plan to touch for at least 15-20 years and that's when the market really started to dive. We are down to about $8,900. I think the move is to stand pat but obviously getting some pressure from my wife that is making me a little nervous.

At the same time, we started a 529 for my son who is currently 1. His 529 is down about 9% since last year.

A few questions:

1) Do I just bite the bullet and redeem now from our Vanguard?
2) For my son's 529, do we continue to contribute? we are depositing money into his account monthly.

Thanks.

[Nutria]

1) Do I just bite the bullet and redeem now from our Vanguard?

Only if you're a sucker. Or need the money next year (in which case you were an idiot to begin with).

Google "s&p 500 chart", and click on the Max tab. Show her the graph.

2) For my son's 529, do we continue to contribute? we are depositing money into his account monthly.

Have her read up on Dollar Cost Averaging (which is what you're doing). Currently, you're buying more shares with that $100 than you were last month and the month before. When the market rebounds, each of those extra shares will bump up the value of your fund even higher.

[snafu]

The point was to invest sums for a distant point in the future. Stop looking at the numbers if they upset you. For those of us who stuck to our plan through the 2008 - 2012 stock market tsunami, it's gone pretty well...today was scary but I have sorted out two things to buy 20 minutes after opening tomorrow.

[parafly]

With a 15-20 year investment time horizon, you need to stick this out. It's not a loss until you sell.

In retrospect, you would have been better off investing in increments instead of the full $10K in one shot. Something like $2K once a month for 5 months or $1K once a month for 10 months would get you into the investment at various price points. It's called dollar cost averaging, and it's a very sound financial practice that protects you from downturns such as the one you are experiencing now.

Don't get too discouraged! The market WILL rebound. It's only a matter of time, and you have plenty of it since this is a long term investment.

[Drake3287]

Ride it out, most likely in a year or so it'll be much higher. Your worrying is very typical of most younger investors. About 6 months ago when the market was at it's highest, I had planned to take all my 457 plan money and put it in a guaranteed fund for safe keeping. I dropped the ball at the time and it's now down quite a bit. When it finely goes back up to my "magic number" I'll be quicker to transfer it!

As for 529 plan, I went against all wisdom and saved for my 3 kids college funds with CD's for 20 years, depositing a little from each of our paychecks. I was always worried that if the stock market crashed or if we had another 9/11 situation I wasn't going to risk my kids education fund.

Although CD rates were very low towards the end of our college saving period, it was easy to accumulate enough money for all 3 of them over the years. Time is your friend in these situations!

[feh]

1) Do I just bite the bullet and redeem now from our Vanguard?

If you do, you'll be locking in losses. Buying high and selling low (due to emotions) is the worst thing you can do.

If you're going to invest in equities, you need to be prepared to see the value fall. It's going to happen. Since you aren't selling anytime soon, the value as of today is irrelevant.

[msomnipotent]

You can think of it as a sale. It is temporary and might be time to stock up on more stocks. I haven't looked at our retirement funds or the 529, but the Coverdell account is down 30% right now (mostly due to bad advice and buying the right stocks at the wrong time). Right now, I am selling some of the winners that I don't expect to do much in the next year and buying some others that are in the tank right now but should do much better in the next 5 years. I have no plans on changing any managed funds unless they do so well that I need to rebalance.

[snafu]

I forgot to mention that some of the large investors like pension funds use a 'stop loss' so when a stock or fund NAV touches a specific level it automatically triggers a sell. Those tip the market and it usually corrects the next day.

[james.hendrickson]

The key question here is if you think your investment will recover. If you don't think it will, go ahead and sell. If you do think it will recover, stretch yourself and buy more. The market is currently correcting, and you may be able to find some good deals.