I've been reading your posts with great interest, and I wanted to say "thank you" for the education.
Now, you've said what you're doing, and why, but as you said, you are retired. I am 45. I suspect your primary objective is to preserve capital. My objective is growth, the more the better.
When the market tanked in early October, I started the process of picking funds, opening up a Roth IRA account, and then investing $5K from cash in late October.
I knew I couldn't time the very bottom, which we unfortunately haven't reached yet, but the DOW had dropped 40+%, which I figured was one hell of a discount.
The question is, when there is a recovery, will it be slow enough to get back in as it starts climbing out of the hole? Or do I continue to fund that IRA to lock in the current discount?
Thanks for your time.
I can’t predict the future, all I can do is tell you what past patterns have been.
Due to the change of psychology from credit-fueled booms to the psychology of thrift and saving reduces the growth of the economy. However, the stock market can take very rapid upward swings when the gloom starts to abate.
We might be nowhere near the bottom. The P/E on the SP500 is very high right now — people look at the approximately 40% drop in the SP500 since last July and say “Surely, stocks MUST be cheap!”
No, not so. While stock prices have certainly fallen hard, earnings have fallen even harder. Unless earnings recover quickly, the SP500 will be falling later on this year. How far, I can’t say. Right now the only thing holding stock valuations up are analysts’ expectations that earnings will recover. Sadly, I don’t think this will the case. Too many equity analysts are still running analysis based on post-WWII recessions. They keep saying “This is the worst since... WWII” or “this is the worst in 50/60/70 years...”
Blah, blah, blah.
THE fundamental difference here is that unlike recessions, which are normal contractions in economic expansion as a normal outcome of the business cycle and a rise in interest rates precipitated by either the bond market or the Fed, this is a debt deflation. Capital is being destroyed, sucked down into black holes on balance sheets.