Cure Money Madness. Buy Low, and Rebalance Often.

Posted on November 26th, 2008 in General, Investing, Money Madness, Retirement, Tips

If you’re like most investors, in the last few months you sold your stocks at the bottom and bought gold at the height or bought T-bills or stowed your money in a savings account. But the only successful response to a market decline is to buy; it’s always been a poor move to sell equities when everyone is in a state of panic. My advice is to take the cash you’ve stuck under your mattress and buy equities.  Here’s why:  96% of the 10-year periods since 1926 have been positive and 89% of the time, equities performed better than bonds.  Given these probabilities, the rational decision is that if you’re investing for  the long run, at least 50% of your money should be in a diversified portfolio of domestic and international equities. That’s the way to benefit from this crisis:  Buy low, stop watching the market on a daily basis and then rebalance to return to your desired equity allocation (in this example, 50%).

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Tags: Buy Low, Investing, Saving