Here’s the advice I gave co-workers who were essentially in similar situation. Like countless Americans their 401K/ROTHs were down 40+ percent.
Those are the same co-workers who had received a FIRST and last email from me giving them unsolicited advice on stocks. I sent them that email within THREE DAYS of the Oct 2007 market peak and that email warned them a horrible year was coming for the stock market, and that they should please consider selling all stocks. I told them I was only writing because I hate to see good friends lose money on stocks.
None of them followed my advice (why would they follow unsolicited investment advice anyway), but a year later they remembered that odd email was perfectly timed, and would have saved them hundreds of thousands each.
So a couple months ago several of them asked me (too late) “how do I recover the value of my now trashed 401K?”
It is a fact that I told them: I’m guessing like everyone, and I’m not a financial adviser. But I play one on Piggington.com! Anyway, i recommend you dump everything near the top of the next Fool’s Rally. I think it will top at about 1100, but I think you should dump your mutual funds when you see the S&P500 hit 1,000, just to be safe. Then wait until the market drops again to at least 750 and oil is below $50/bbl, and then buy oil stocks, and also buy gold when it is under $720/ounce.
After I told them that, the markets did have one rally left that took the S&P500 up to 1,000. Glad I told ’em to sell at 1,000 because markets never made it to 1,100.
I doubt this stinking market has another rally in it that will take the S&P500 up to 1,000. This last week’s Fool’s Rally only made it to 900.
I kinda think you gotta trade out of stocks whenever you can, then look for a good entry point to trade into oil and gold. Then hold those long-term. That’s one of the more certain paths to recover your lost riches, but expect to wait 3 to 5 years before both oil and gold are multiples of today’s prices. I also think some international markets (China, for example) will be smart to buy into at their bottom. Yet, I think the bottom of markets like the Chinese stocks is still probably 6-9 months away.
I’m sure we’ll see US stocks slide to 600 or below on the S&P500 by next year. International markets have not bottomed yet either, but some are close. So you want to get the hell out of stocks.
