Pennsylvania Investment Observer

I feel Awful, Let's Buy Something

by Daniel J. Nestlerode

As I look at the value of my retirement accounts, I feel awful. The value has declined a lot since January. While I have sold a few stocks and have some cash, I still hold a number of investments that have declined a lot further than I thought that they would fall. Woe is me. At this rate I won’t be able to retire until I’m at least ninety. In another venue, I would be running around saying the sky was falling, or perhaps crying wolf once more. Sometimes our feelings lead us around by the nose.

I have, unlike many others, the advantage of participating in the investment markets for over fifty years. In that time I have seen market rise and market fall. I have seen them rise for good reasons and I have seen them fall for good reasons. I have also seen them rise and fall for no reason in particular. However, the financial press always has had a reason de jour, no matter what the situation. The truth is that stock prices vary.

Knowing that stock prices vary isn’t very useful information, until you ponder what you might do. As in most situations where you are buying assets (stocks, mutual funds, real estate and the like), the most profitable way to participate in the investment arena is to buy at low prices. Checking my current mood about the value of my portfolio, I notice that we have low prices. So, in a sense, we are either at or very near the time to buy more stocks. I must note that I am investing more for another nine years before I have to take money from my IRA accounts, so I have a rather long time horizon. The stocks that I buy this week are part of my investment goal that is nine years away. From a timing perspective, stocks are much better buys now than they were last January. They might go even lower in price from this point or they might rally and go higher. I really cannot tell what will happen tomorrow. I can build likely stories that support price moves in both directions. So, my course of action is to buy the most underpriced stocks I can find right now, committing some of my money. Then I will reassess in a month and repeat the process. In the mean time, if any of my stocks rises unexpectedly in price, I will be ready to raise cash by selling.

Hopefully when the stock market recovers and I am feeling much better, I will not be lulled into inaction. When everything is going right with the investment markets, something will come along and prices will change. So when I’m feeling great, I will be selling my big winners, talking the profits. Then I will examine the markets and continue to look for underpriced assets, so I can continue to buy low and sell high.

Sometime in the coming months, I will feel great about my retirement portfolio: I feel great, time to sell.

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