Will Transferring Assets To Cash Really Make You Safer?
Henry Montag, CFP, CLTC | March 30th, 2009
Despite the fact that well over 30 billion dollars has been diverted from the market, over the first 23 days of October did that really make the investors that moved their money feel any better about their portfolios? More importantly was it the right thing to do?
I felt that if an investor had at least 3-4 years before they needed the money it probably wasn’t the right move. More than likely it was an emotional reaction to fear and in doing so, they did a real disservice to their portfolios as well as to their families. Trying to time the market is always the wrong thing to do and the reason being is that people don’t know the right time to get out. The time to do so would have been in Jan or Feb 08. If you were unclear about when the right time to have gotten out was, it is time to check in with The Trusted Expert Network. The damage one does by moving to cash is that at that time they actually lock in their losses. In addition once your in a safe low yielding CD or money market paying say 4.5% gross you’ll actually be moving backward due to taxes yielding a net 3% and inflation of 3-4%.
In addition if the intent was to make you feel better, imagine how you’ll feel when you miss the one or two initial moves of a recovery. Most people wont feel comfortable returning to the market until after it has risen significantly and at that time they’ll already have missed a timely gain and they may be tempted to wait until the market drops again before they feel comfortable re entering the market.
Most people feel much worse when they feel that they’ve missed that big bounce that always comes with this type of volatility that we’ve been seeing these last few months.
Point is if you haven’t already gotten out early on the best thing you can do now is ride out the market and wait for better times ahead. The market has always come back fro these types of crashes and came back with some significant gains over a period of time. We came back from the recession of the early 70s the failure of the S&L mess in the 80s, the stock market crash of 1987 and 1989, the tech bubble that burst in the early 90s, and of course the terror attack of 9/11.
Although times are extremely painful right now things are no different now than they were at any time in the past and the market will of course come back when we least expect it to.
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Tags: cd, financial portfolios, henry montag, personal finance, transferring assets
About the Author: Henry Montag is an Independent Certified Financial Planner as well as a CLTC. He’s been in practice since 1976 with offices on Long Island, New York. He is a contributing writer for The Moneypaper, a national financial publication, been my sourced by Investors business Daily, Long Island Business News, Newsday, Wall St Journal, The Moneypaper,Investment News, Senior Lifestyles and has held insurance and securities licenses for over thirty years.
