Tuesday, October 7, 2008

Should You Sell Your Investments?

There was a Q&A column in today's Chicago Tribune about what to do with various investments. It's not very detailed, but basically gives sensible advice: If you sell now, you lock in huge losses; if you stop investing in your 401(k), you will regret it, and for God's sake, don't cash in your 401(k) early.

I think a good thing to keep in mind when trying to "time the market" with investments is, don't. The average investor has a tendancy to be always chasing the market. The market goes down, so you sell. It goes up, so you buy. That's buying high and selling low.

Another way of looking at this is that even experts who do this for a living have no idea what will happen next. Last week, I read one article on Marketwatch saying that prices had hit "a short term bottom." That was 800-some points ago. Other experts were warning that stocks had much, much farther to fall.

Then again, probably the best rule of thumb is, don't take investment advice from me. When the market was down last week, I finally got around to opening that college investment account for Pebbles. When the Dow was down 700 points yesterday, I swallowed hard and added money to each of the girls' accounts. Unfortunately for me, these accounts buy your shares at the closing price of the day you deposit the money. So when the market recovered the majority of its losses yesterday, I ended up buying at a higher price than I'd hoped. Then today, it lost that same money all over again.

Oh well. The only bright spot, for me, is that I'd been meaning to open that account for Pebbles for nearly two years now. If I'd opened it then, I'd have lost even more of it by now.