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What’s Your Time-to-Bail Number?

Thursday’s markets were lousy, and, down early and forecasting more losses, Friday isn’t looking much better. If anything, Thursday’s 420-point drop in the Dow Jones Industrial Average showed that the European debt crisis may be a far more significant market-moving story than the S&P downgrade of the United States’ credit rating. With signs the turmoil in the markets could continue for a while, the debate is being reignited: When is the right time to move money to the sidelines? When the Dow dips below 10,000? When the Standard and Poor’s 500-stock index hits 1,100?

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Many advisers say they’re getting fairly close to their trigger point. In particular, the S&P 1,100 mark – the average closed Thursday at 1,140 — is a popular one. SunGard Global Trading Product Manager Russ Chrusciel points out that would put the S&P at about 20 percent off its 52-week high of 1,370 in early May.

“This is a fairly significant downward move in a three-month period of time, and would certainly make me re-examine how ‘long’ I want to be in this overall market,” he says.

Others, particularly advisers who have already moved their clients to cash, say the time to bail was yesterday. If anything, they see buying opportunities in the current downward spiral. “As opposed to having a bail-out number, we are more inclined to have ‘dip in’ moments,” says David Katz, senior portfolio strategist at New York-based Weiser Capital Management.

Or should one maintain a buy-and-hold mentality in the belief that that what goes down must go up – hopefully sooner than later? “I bail out at zero,” says Frank Armstrong of Miami-based Investor Solutions. “I’m not delusional enough to believe I can predict either market tops or bottoms. Market timing has never worked very well before, while staying the course has always worked.”

Still, if there’s one point that advisers can agree upon, it’s that today’s roller-coasters markets require  some strategy. And “hope is not a strategy,” says Mark Lamkin, who heads his own wealth management firm in Louisville, Kentucky. “Advisers better have a plan and better have a process.”

Readers, what’s your bailing-out threshold?

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