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Your First 100 Days of Investing in a Bear-Market Rally
What Grade Do You Get?
The recent current events game has been to rate our new President's first 100 days in office. How about turning the tables and rating the way most of us have dealt with investing over the past 100 days? That period included a steep drop in the market from February through March and then a rally. While a lot of people hope that this recent upturn is the beginning of a new bull market, here at Elliott Wave International, we see it as a bear-market rally.
So, how's the investing going?
1. Homes. Let's start with the major investment for most people -- our homes. A report today shows that home prices in 20 major markets were down another 18.6% from February 2008 to February 2009, according to S&P/Case-Shiller. Phoenix took the hardest hit, down 35%. Four other cities with large drops in home prices were San Francisco, Miami, Los Angeles, Las Vegas. Those who bought within the past 100 days as houses have continued to lose value get a B. Those who bought two years ago at the top of the market? That's got to be a painful F. Those who own their homes outright get an A. Everyone else gets a C.
2. 401(k) and mutual fund investments. 100 days ago toward the end of January, the Dow was near the same level it is today, April 30. It's a wash. Give ourselves a C. But the farther back we look, the worse the news. Dalbar, a company that evaluates the financial services industry, points out that "With an annual loss of 30% last year, asset allocation fund investors fared better than equity fund investors," who lost 41.6% last year. Sounds like in the longer term, most of us probably deserve something closer to a D on our 401(k) and mutual fund investments.
3. Buy and hold investing. What used to be the "only" way to invest -- buy stocks and hold onto them -- has proved to be a mirage instead of good investment advice. It turns out that it works only in a bull market. Buy and hold is now being tossed out the window by financial planners who have figured out that it's guaranteed to make their clients unhappy. Why pay someone to lose money? Give this method a big, fat F.
Let's face it. Knowing where to put money now isn't easy. We can help. Bob Prechter's New York Times best-selling book,
Conquer the Crash has helped many people figure out what to do to stay solvent. In fact, the subhead for the book says it all: You Can Survive and Prosper in a Deflationary Depression.