I Took My Money Out Of The Stock Market Because I Knew It Would Fall, Now What?

Well, this is actually the third time I’ve gotten a request like this, and I’ve emailed back both times before. Probably pointing out that I should address it publicly. 🙂

So it is a fairly delicate situation first of all, because each person has their own investing thresholds and personal choices when it comes to money, so keep in mind this is MY own feelings on the situation – refer to my disclaimer that I’m not a professional, just someone that has had similar questions myself.

Hank, As you are aware the stock market has been pretty uncertain as of late and I didn’t want to be part of the fall.  I didn’t want to lose any more of my money than I had to. I am only just getting started investing so I want to get started on the right foot, so I took what I had (about $10,000 out and it is sitting in my checking account right now. 

I figured that keeping out was better than being in for the time being, but what about now? There has to be something that is making money? Where do you recommend I put it? – Lazlo from Mississippi

Hey Lazlo, and thanks for swinging by MIB!

My Thoughts

First off, realize that the stock market is volatile, it’s just the nature of the beast; but be assured that (and I assume you’re fairly young still) you have a LOOOONG road to ride still.  You’re going to see swings like this in the market, that’s how it works.

The benefit to it being low though, is that you’re BUYING low also.  That means you’re getting more bang for you buck than if you were to buy the same stocks when the market is doing well.

Additionally, if you’re investing in well-researched stocks/bonds/mutual funds and not gambling with your choices, there is a good chance you’re going to make it alright in the long run.

If our stock market takes a dive, that means our economy is taking a dive and you’re likely to have worse problems then where your money is invested.

You also say that you have it sitting in your checking account right now.  I can assure you that your money will make you more money by sitting on the end of a fishing hook in the middle of the Atlantic than it will in your checking account.

At the very least, put it in a high-yield savings or MMA account.  I’m still getting a decent 3.30% from WAMU right now even when times are fairly tough.  I’m keeping the e-fund sitting there for now, but still dumping 15% of my salary to my 401k in addition to maxing my ROTH out.

My Conclusion

It’s not a bad time to be in the market if you’re young.  If you’re under 40, you’re probably looking at another 20-30 years of letting your money simmer.  If you’re over 50 and looking to retire, maybe now isn’t the best time to have the $ in there.

But guessing as to where you’re at in life (early 20s?) I’d recommend you PUT IT BACK IN!  If you’re unsure where to invest it, I’m happy to help.  I helped FFB out a while back with my take on his 401k options and I’m willing to help if I can!

photo by: /jimmcd/

Filed Under: 401KadviceDebtEmergency fundfinancial educationMutual FundsNet WorthPortfolioReaders RequestsROTH IRA

  • I agree! I’m a long-term investor. I just don’t bother myself with what the market does short-term.

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  • The market is ugly right now. Pulling your money out is probably the right move, just be ready to put it back in at some point.

    I have been telling my readers for months to pull out of stocks, or at least get into the right stocks.

    I think the Dow will hit 10,000, maybe lower if some banks fail. If you want to be in stocks, I like Philip Morris Int’l. If you can stomach volatility, I like Chesapeake Energy (CHK) also. I also like Apple on any weakness. Those stocks can perform in this ugly market.

    I tell my readers that diversification isn’t the way to wealth. If you have a diversified portfolio, you are getting killed in 2008. Because I’m weighted heavily in winning stocks, I am up nicely on the year when the markets are down 15+%.

    I’m a long term investor but I also pay attention to the market in the short term. Why leave your money in to take a 20-30% hit? I sold many positions and will be ready to put cash in at cheaper prices. I don’t understand why being a “long term investor” means ignoring today’s news.

    Lastly, don’t try to guess a bottom in sectors like financials. You are better off being late than early because the pain isn’t over yet.


    Kevin at 20s Money’s last blog post..Cash In The Second Half Of 2008

  • I have a few thoughts on this.

    1) If you are panicking and selling of securities because the market is approaching a new 52-week low, you are not diversified enough. Regardless of your age, your portfolio should be setup with enough cushion through diversification to soften any extreme losses to the market.

    2) Playing the market like Kevin is extremely risky and although he can brag about being up this year in a down market, lets ask where is in 15 years. Perhaps he is a skilled investor (which I’m not) and can play the market like this, but for the most of us working full time, funds is where we are comfortable, safe, and will experience long-term gains.

    3) My suggestion to those that have pulled out of the market and are looking for a place to park it – put it back in. Why put your money in a Money Market Fund or other low, but concrete, savings vehicle and not purchase securities at a discount now? If you wait to enter into the market, you’ll be losing twice. You locked in your loss by originally selling and you will be out the recovery money by not buying back in now.

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  • I recommend putting back in also because stocks can only go down so much, and if you keep it out then when would you put it back in. You will probably end up losing more money in that case, than keeping it in.

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  • I agree for most leaving it in is the best option. Trying to time the market is very difficult. If I had $100,000 to invest now I would put it in over time. Something like add $20,000 now and then $10,000 every other month as my plan (which might adjust depending on how the markets go). If I had my money invested as I wanted already but was concerned about the decline – I would just stay with what I have. I would wish some I was smart enough to sell earlier and buy at the bottom but then I would remember that is too hard to really do.

    As you mention, if you get close to retirement you need to move substantial funds out of the stock market. But still I would be less than 30% in cash or short term bonds prior to retirement. In this type of market I would be a little more in cash than I would otherwise just because the risk of a long (say over 5 years) significant decline (say 5 years from now down %30 from here – it could easily drop that much but normally I think it would rebound within 5 years at least somewhat) is fairly high (though still pretty low) in my opinion.

    Curious Cat Investing Blog’s last blog post..Food and Energy Costs

  • Here is the best investment advice that you will find …

    Sell all US stocks and buy gold. The short and long term outlook of the US financial markets are not good. The stock market may not be a good place to invest for another ten years. Therefore, selling is the right move and buying commondities will give you a positive return for the next decade as the world is running out of resources and prices will continue to climb.

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  • I would be worried about an investment strategy that relied on commodity prices alone (even more so a single one like gold). It is true to say that gold usually does well in uncertain times and there is a global shortage of commodities. However commodity prices are notoriously volatile and can be affected by many unpredictable factors.

    The current surge in commodity prices is being driven by speculation as well as shortage and as a result could reverse very quickly when (if?) the more traditional homes for money (stocks or even mortgage-backed securities!) become more attractive.

    How specialized you want your portfolio to be should depend on your skill as an investor, your investment period, the amount of time you have to devote to investment, and your appetite for risk.

    Remember that for every person boasting about success with a narrow investment strategy there will be at least as many keeping very quiet about some truly massive losses!


  • Diversification of both stocks and strategy!
    Dividend-paying companies that increase their dividends.

    These are my methods. Maybe I resonate well with the markets, because volatile markets don’t seem to bother me at all. I can’t brag of any supernatural returns. I just like my regular income streams. That’s all I will need to be financially free.

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  • One more vote in favor of putting it back in. If you’re going to buy something anyway (it sounds like this reader isn’t out of the market for the long haul), you may as well pick it up when it’s on sale. Just because a better sale may come along later, that doesn’t mean you didn’t get a bargain.

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  • Patience, patience, patience.

  • my friend have bought some bad stock and still keeping them. yeah like Writer Dad said we must patience.

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  • Carl J. Rizzo Jr

    You all want to leave your retirement money in the stock market right now? Are you insane? I’m 31 years old, self-employed, and all I have (had) so far is $8200.00 to put into a ROTH-IRA. This was 4 months ago. Since then, I’ve lost $2200.00 and the bottom is STILL dropping out. You expect me to ride this nonsense out? If this continues and I lose almost 2-5% of my money almost every day, I won’t have anything left to bounce back with. I’ll gladly take the $500.00 penalty for early withdrawal before i have nothing left to withdraw. I’m probably the least savvy when it comes to managing finances but I’d rather bank on the guarantee that if I have the money physically in my hands, nobody, no bank and no government can find a way to molest me. I’m furious about all of this and I don’t know what else to do.

  • There’s rick in stock market and you need to have sharp eye and good info before buying the share.

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  • @Carl – I agree with you sir, it’s a scary sight, and if your money is set it and forget it, I can understand your fear. However, if you’re religiously putting money into that account, it most certainly is losing value right now, but if you have confidence in the stocks, bonds, and mutual funds you’ve chosen, then you’re buying more shares at historically low prices. If you’re 31 years old, the stocks/bonds/funds you’re buying now are likely to be worth more in 30 years at retirement than they are now.

  • my dad have bought some local share many years ago and he can’t let them go as the value is getting lower and lower. He just hope when the value is higher he can sell it off.

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  • kev england

    Hi guys,

    I have invested £90,800 with HSBC. My financial advisor there talked me through it all and, based on his understanding of my level of risk taking, we placed it into a Taxed Plan. This was split 10% here, 10% there etc. Some in low risk, majority in medium risk and 5% in high risk. This was in December 2008. In January 2009 i had £94,000. Now, March 2009, I have £84,000. I have had £10,000 wiped off its value in 8 weeks. This has really made my knees wobble! I am now considering cutting my losses, cashing in and putting my money into a property which i will live in. I am new to investment, i do not understand it completly. I would really appreciate some advice – i do not know what to do. Should i cut my losses and grab my £84k now, or do i leave it in. I do understand that i am only 4 months in to a 5 year plan but i dont understand what the point to leaving money in an investment that is going down – and i expect it to go down more. Should i take what i have now or shut my eyes and look again in 5 years???

  • I think you have to invest when the market is going down like it has. This is a great time to look for solid companies that pay dividends or bonds that pay. Yes dividends have gone done but alot of companies still pay trhem and will rasie them when this is over. If they do not raise them the stock prise should rise anyway and you will make money waiting.

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  • JohnMathew

    This is such an important topic, thank you so much for sharing.

  • I took my money out of stocks but with the recent rebound, I'm wondering if I made a mistake.