Q: I have all of my money in stocks and I have never tried moving it into anything else. What if I was pretty certain that the stock market was going to have a negative adjustment? Should I move my money into something else temporarily until it starts to rebound?
A: You’re talking about market timing; the answer depends upon the probability of being right in your prediction, the benefit to you of being right and cost of being wrong. For most investors, particularly those relying on their investments to fund retirement income someday, market timing is a poor bet.
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I have never “timed” the market, and I am very conservative in my investments (a mix of stock and bond funds with moderate to conservative risk ratings). Unfortunately, we may be approaching a virtually unprecendented event: a default on our debt which WILL crash the markets. What is more likely is that there will be some sort of last minute agreement- but even that probably means a significant market correction, and a relatively slow recovery-so this time I am considering jumping out and back in-timing the market. I will admit that even the thought gives me pause- but these strange times may require new approaches to investment.