Re: 73-74 sell off. If JD said that the best thing to have done then was to stay invested, I disagree with him.
A personal story. In 1972, I was with a international CPA firm. Our rules prohibited investing in a client, even in a mutual fund. Because of this limitation, my firm put together an in-house pool and hired Donaldson, Lufkin, and Jennerette to manage this fund, picking only non-client companies as investments. DLJ was about the hottest money manager in Wall Street at that time. I invested $10,000 in the pool. My investment went up for a few months - a lot. Then the sell off started. When it bottomed, my investment was worth less than $3,000. It came back, but it took until about 1980 to get back to $10,000.
I learned from that experience, and I became a firm believer that in obvious market-top bubbles, you can time it. I began selling down my portfolio earlier this year because the P/Es had become so extremely high. Now, I just started to buy back by purchasing 100 sh. SPY. I will slowly dollar cost average back into some of the good stocks I previously sold. I may be a little premature in going back in now, but I have saved a lot so far. By going in slowly, I won't completely miss out if a major upturn starts before I think it will.
Staying completely invested may make perfect sense in normal times, but in 1972, 1987, and 1998, the market top bubbles were obvious. |
