Let's talk 401K

[waltstockk]

Don't forget if you want to do the self-directed investment route via a Scottrade, Etrade, etc., you can hedge your long positions with short, double short, and even triple short ETF's (exchange-traded funds) that increase in value one, two, and three percentage points respectively for every one percentage point the market or particular sector goes down. I would certainly not bet the nest egg in these things and use these strictly as trading vehicles, but they can offer great protection if you buy in on any significant rallies as the market is guaranteed to go up, down, up, down etc. for quite a while. For example, this past week I bought into ticker SRS (real estate double short) and ended up virtually doubling my money in just a few days before cashing out yesterday when everything else tanked. You can also play options to insure your long positions, but I prefer the liquidity and simplicity of the inverse ETFs such as tickers QID (2x NASDAQ inverse), SDS (S&P inverse), SKF (financials inverse), etc. There are a whole bunch of ETF's for different sectors. And for those really down days where you want to load up on long positions, there are 2X and even 3X ETF's nowadays that give you 2 and 3 times index performance. Good luck, I feel your pain, but am slowly chipping away at my overall losses thanks to my newfound friends, the inverse ETF's.

[Redshift Z]

You know after dicussing with you Mike and reading everyone else's reponses does make me feel better. I guess with us having this wonderful forum and straight shooting guys, does sound alot better than listening to the news (know it alls). I think this week will be a good week.

[MikesZ06]

Originally Posted by Redshift Z

..... I think this week will be a good week.

I hope it is but don't be discouraged if it's not.
This is not something that is going to cure itself in a hurry and while we may be "sniffing the bottom", as someone said earlier, there's still bumpy times ahead.


Mike

[PowerPro01]

Originally Posted by MikesZ06

there's still bumpy times ahead.

Maybe Bette Davis WAS right..."We're in for a bumpy ride..."

[vant]

Hey Jub. I thought you might like a little more reassurance.

Originally Posted by http://www.zacks.com/stock/news/16153/Don%27t+Sit+on+the+Sidelines

Don't Sit on the Sidelines

Posted Mon Dec 01, 10:28 am ET
Posted By: Tracey Ryniec

Investors are reeling from what has become the worst year on the stock markets for several generations.

We all know the gloomy story.

Before last week's mini-rally, only 10 stocks in the S&P 500 were in the green for the year and more than 40% of the Russell 3000 was trading below $10 a share. Only Wal-Mart Stores (WMT) was higher for the year in the Dow Jones Industrial Average ($DJI).

The small caps have been getting hit especially hard. Two weeks ago, the Russell 2000 dropped 14% in just two sessions, the worst 2-day loss in its history.

Volatility has been through the roof. Barron's reported that Goldman Sachs recently told clients that the S&P 500 (SPX) 3-month realized volatility was at 66%, surpassing all other volatility levels except that during 1929, when it was at 68%. Goldman apparently expects the volatility index to surpass that dreadful year shortly.

With all this bearish news, it's logical that most investors believe it's better to be sitting on the sidelines.

But that would be a mistake.

History has shown that vicious bear markets are followed by big market rallies. If you stay out of the markets, and think you can time when to jump back in, you're likely going to lose out on much of the rally.

The sustained rallies, which have generally happened within a year of the bottom of the market sell-off, have been huge.


Great Depression market downturn of Sep 1929 to July 1932: Rebound was 172.2%

Super Bear market downturn of Jan 1973 to Jan 1974: Rebound was 56%

Market Crash of Aug 1987 to Oct 1987: Rebound was 35.8%

Dot-Com Bust Jan 2000 to Oct 2002: Rebound was 36.9%

But what if we're not at the bottom, you ask?
No one can time the market perfectly. But historically, there are many more years of "up" markets, then down.

Investors are now flocking to the bearish mutual funds in order to get returns. Many of those funds are having a stellar year betting against the markets. But if you look at their longer returns, the story isn't so rosy.

The Prudent Bear Fund (BEARX) for example, returned 34.50% in the last 3 months. But its long-term return is a different story. It has returned just 0.04% from 12/28/95 through 9/30/08 compared to 6.95% for the S&P 500 and 5.61% for the Nasdaq (COMP). How well have investors timed that?

If you're scared about getting back in, keep in mind that most of the damage has already been done to the markets. As hard as it may seem, investors now need to look at buying- not selling.

Market crashes are once-in-a-lifetime opportunities but you must be invested in equities in order to take advantage of the rally. Just look at last week's rally. What should have been a "quiet" holiday week turned into the best week on the S&P 500 in 34 years, with the index up 12%.

Sitting on the sidelines may seem safe, but the rewards are few.

[jub jub]

Thanks Vant. After yesterday's downturn, that is some encouraging news.

[defender]

I think that 8500 is the new 11000 for awhile - with all the people playing short - it will be a zig-zag sawtooth chart.

Selling this low just means that you lock in your losses - not a good thing unless you need some cash to survive...