Stock market: If you had the guts…

… what would you do with the cash sitting in your brokerage account?

I maxed out my Roth IRA (TDAmeritrade account) back in April, and have just let the money sit idle. Anytime I mention this to someone in the investment biz, they say “Good!”  Current stock market fluctuations make absolutely no sense to me, and I don’t trust the Dow to stay be this unjustifiably buoyant for much longer. If I really wanted to put my money where my mouth is, I’d pick a stock to short – but I’ve never shorted.

So what’s a MoneyMate to do with cash that’s locked up for at least another 20 years? Do I start researching stocks to buy? Is there even a point do to doing that? Do I continue to sit and wait? Do I pick a mutual fund?

What are you all doing with your money in the market?

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6 Responses

  1. I haven’t taken my money out of the market, because I don’t believe that I can time the market.

    This means that stuff I bought last year and before is doing poorly at this point, but I have confidence in (and time for) market recovery.

    I use Scott Burns Margarita portfolio because his rationale is easy to understand, the plan is easy to implement, and it focuses on low-cost index funds (and I don’t want to give all my gains to my broker). His first article on it is available at
    http://www.dallasnews.com/s/dws/bus/scottburns/columns/2004/stories/031604dnbusburnsside.98a3a.html

    • I forgot to mention: If you are concerned, like I am, that we are in the first peak of a W-shaped recovery, you might consider dollar-cost averaging your re-entry into the markets.

      So, for instance, if you have $12K, you’d decide now where it is going, and then put 1K a month, on a set date (like the 1st or the 15th), in. If the stock market goes wahooni-shaped in the middle of your re-entry, you won’t lose as much. On the other hand, if the stock market continues to zoom upward on the trend it has been following, you won’t gain as much.

      The other potential problem with this approach is fees – for instance, if you buy VIPSX through Scottrade, you pay the same fee ($20)every time you buy, no matter how much or little money you are spending. Obviously, you want to put your entire planned allocation order at once, because every $ of fees spent is a $ that isn’t earning you money.

      With the way our government is spending, the question is not whether serious inflation will kick in, but when. When the inflation hits, you want to be out of dollars, because they are certain to lose value. So I encourage you not to stay 100% cash for too long.

  2. I just picked a Handful of stocks Warren Buffett has and figured that would be the best I could do 😉 he’s a big fan of holding on for years so it works for me! I wrote a post on it recently if ur interested in checkin I out, but I say do what makes you comfortable – whatever that means.

  3. If you have a brokerage account I would recommend ETFs that track the S&P 500 and another that tracks international markets. If you don’t have a brokerage account you could invest in a similar mutual funds just make sure that they have a low management fee.

    My mix is a bit of a hodgepodge at the moment since I don’t have a ton of money in the account. I regularly invest in a target retirement mutual fund and the rest of my money goes towards a variety of large cap ETFs, a small cap ETF, and an international ETF. I only buy ETFs in $1,000 increments, so I do have an eventual plan for my mix. I’m just working slowly towards getting there so I don’t incur too many trading fees.

    I believe in the buy and hold mentality. I crunched the numbers in my Roth IRA last week. I’ve recovered 60% of my losses so far. 79% of the recovery happened in the last 6 months, and even more has been recovered in the last week or so. If I had pulled my money out of the market I’d be in a worse situation.

  4. Wow, the people you know in the investment biz think it’s “Good!” that you sat in cash during a time the market has had a huge rally? If it were me, I’d probably rethink any advice I received from them… 😉

    As far as what I’d do with money I wasn’t touching for 20 years, that’s pretty easy. I’m of the opinion that playing around in single stocks without being VERY familiar with the workings of the company in is more akin to gambling than investing. So I prefer to buy it all: Set up a 50/50 split on Vanguard’s US & international stock market indexes (VTSMX & VGTSX), and ignore it until next year contribution.

  5. I take it you mean you have cash sitting in the brokerage account but not invested? Time to put that money to work! Like another commenter I would dollar cost average into the market, probably in ETFs. But what are the trading fees? If the fees are high relative to the amount you have in the account then you should just lump sum invest it. I have a few Vanguard ETFs – Total Market, Extended Market and Europe. But they are a small part of my investments, most of the money is in mutual funds at T Rowe Price. I like them for dollar cost averaging, no fees and no minimums with automatic investing. I’m now setting up a Roth directly with Vanguard so I can get their low expense ratios without the trading fees.

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