SmartMoney Blogs

Real-Time Advice
Our real-time advice on how market shifts and news impact you and your money

Sorry You Went to Cash?

So you cashed out. And now that the Dow ended last week with two straight days of triple digit gains, you’ve probably been kicking yourself since Friday’s close, wondering what you’re going to do come Monday morning.

Getty Images

You’re not alone: Plenty of investors moved to cash early last week when the market first cratered. For example, U.S.-domiciled equity funds saw net outflows of $14.4 billion in the week ending Aug. 10, according to Lipper — the biggest wave of net redemptions since May of 2010. Some even got the timing all wrong, locking in losses for the year instead of avoiding them.

But it may be too soon for sellers’ remorse, say experts. The new U.S. debt deal and the escalating sovereign debt crisis in Europe could mean the worst is still coming for stocks, says Jonathan Satovsky, chief executive officer of Satovsky Asset Management in New York. On top of that, some crashes are drawn out for weeks or months, with occasionally temporary rebounds — making market timing extremely tricky. In the last downturn, stocks lost 7% on Sept. 29, 2008, but didn’t bottom out until March 2009 — six months later. “We’re going to be in an extraordinarily volatile period,” says Satovsky, chief executive officer of Satovsky Asset Management in New York. “Where you have to brace yourself for what just happened in the last couple of weeks for the future.”

Of course, other investors have had better luck. Last week, many investors made significant moves out of equities in their 401(k) plans on the days when the stock market saw big losses, and they moved money into stocks on days when the market rallied, according to research from Aon Hewitt. Meanwhile, many pros are abandoning their buy-and-hold approaches: About two thirds of advisers surveyed this spring by insurance company Jefferson National said they planned to use “tactical management,” (a fancy term for market timing) more often. But as the last few weeks have shown, it can be hard to get those moves exactly right. “They’re never going to be able to pick the exact low or the exact high,” says Andrew Goldberg, U.S. market strategist for J.P. Morgan Funds.

For investors regretting their exit from the market, it’s not too late to get back in. After all, the Dow Jones Industrial Average is still down about 1,500 points, or about 12%, from the high it reached in late July, says Richard Meyer, senior wealth adviser with V Wealth Management in Overland Park, Kansas. For investors who went to cash and missed the rally, Meyer recommends re-investing about half the money they want to allocate to stocks for the year this week, and invest the rest over the next few months.

Others say that if you’ve found yourself making too many moves lately, it’s time to re-evaluate your risk tolerance, revise your long term plan and stick to it. “Investors who have the guts to stay invested and stay balanced today I think it will pay off in the long run,” says Goldberg.


We welcome thoughtful comments from readers. Please comply with our guidelines. Our blogs do not require the use of your real name.

Comments (1 of 1)

View all Comments »
    • By WebOsPublisher

      Soft32 Forums
      .ipb_table table-layout: fixed;
      .ipsLayout_content width: 99.5%;
      img.bbc_img max-width: 100% !important;
      Jump to content
      Sign In
      Create Account
      Search section:
      ForumsMembersHelp Files
      View New Content
      Javascript Disabled Detected
      You currently have javascript disabled. Several functions may not work. Please re-enable javascript to access full functionality.
      Toggle Soft32 Support & Services Soft32 Support & Services
      Last Post Info
      Site Announcements
      Here we will announce all the news and updates regarding the website, forum or Soft32 products & services.
      3 topics
      0 replies
      Soft32 Updater avai…
      By Soft32 Admin
      22 Aug 2011
      Site Feedback & Support
      Here you can find help & info and ask for support, give us feedback and send suggestions regarding Soft32 websites.
      37 topics
      7 replies
      MPG to Final Cut Pro , conv…
      By lilycarrly
      05 Dec 2012
      Forum Feedback
      Here you can give us feedback and send suggestions regarding Soft32 Forums.
      1 topics
      0 replies
      How to transfer ePub files…
      By bbcc363
      Yesterday, 07:49 AM
      Soft32 Updater
      Soft32 Updater Homepage
      Here you can give us feedback, send suggestions and report bugs regarding Soft32 Updater application.
      10 topics
      8 replies
      How to Rip Blu Ray to MOV o…
      By bbcc363
      Yesterday, 07:49 AM
      Recent Topics
      How to transfer ePub files between iPad and PC
      - Yesterday, 07:49 AM
      How to Rip Blu Ray to MOV on Mac
      - Yesterday, 07:49 AM
      MPG to Final Cut Pro , convert mpg files to FCP freely
      - Dec 05 2012 08:59 AM
      Unable to submit software
      - Nov 11 2012 10:59 PM
      How to update my software or delete it?
      - Aug 22 2012 03:37 AM
      Total Posts
      Total Members
      Newest Member
      Most Online
      The Moderating Team
      Today’s Top Posters
      Overall Top Posters
      Most Liked Content
      227 users are online (in the past 15 minutes)
      1 members, 226 guests, 0 anonymous users
      (See full list)
      Uggbootsitq, Google, Yahoo, Bing
      Privacy Policy
      Sign In
      Need an account? Register now!
      I’ve forgotten my password
      Remember me
      This is not recommended for shared computers
      Sign in anonymously
      Don’t add me to the active users list
      Privacy Policy

About Real-Time Advice

  • How breaking news — in the markets, Washington, and around the world — affects you and your money. Have a question about how current events may change your financial future? Email us at ask@smartmoney.com.