If/When the Market Crashes/Corrects

[billyjoe]

Most here seem to agree that we are in for a major correction,some would say a crash, that could occur shortly. If this is about to happen and you were in the following situation what would you do ?

1. You are planning on retiring in 10 years or less

2. You've got a million $$$, but it is all in stocks and mutual funds

3. You don't want to risk missing out on possible huge gains , such as happened in the late 90's.

4. How much would you put into cash & cd's and how fast would you do it?

5. This vaguely refers to me except for the million $$$ part

--------------billyjoe

[skiracer]

Most here seem to agree that we are in for a major correction,some would say a crash, that could occur shortly. If this is about to happen and you were in the following situation what would you do ?

1. You are planning on retiring in 10 years or less

2. You've got a million $$$, but it is all in stocks and mutual funds

3. You don't want to risk missing out on possible huge gains , such as happened in the late 90's.

4. How much would you put in CDs.

5. This vaguely refers to me except for the million $$$ part

--------------billyjoe

Billyjoe,
I'm 62. I haven't made plans on retiring in the next 10 years or earlier but would if I wasn't enjoying what I am doing. We have a decent amount of money invested in the so called blue chips all of which are in DRIPs for each stock we own. I have never taken any of the dividends out and just let them plow back into each stock. My only perogative is that those stocks pay a dividend. I used to worry about those stocks falling lower as they cycled and each time they would fall I would look at my pile and wish that I had rotated in and out with each down period. But after awhile they always seem to return to their highs. It takes getting used to seeing the pile go up and down but I don't think that is what counts. The dividends are what is important. If the prices go down and the dividend remains constant without falling or them lowering it then I don't give them a thought.
I don't have a thing in mutual funds of any kind. I would never let anyone else handle my money. I own a few CD's which we bought because my wife was persistent in insisting that we own some of that type of instrument. I only agreed to keep her happy. I'm more into stocks and treasuries. Tax deductable treasuries specifically. They are bland but usually make money quietly over the course of their life thru to maturity.
Dividend paying stocks in dividend re-investment plans are the way to go over the long term and a lifetime. Put the money in and forget about it as long as the dividends remain constant or are increasing. If they lower the divy drop the stock and put the money into something that is constant or raising their dividends. I also look at the down times in their cycles as an opportunity to re-invest more capital in those stocks, if we have it available, as long as the dividend remains constant. KO, Coke is a prime example. We have owned it for years doing just as I have said. About 3/4 years ago it fell from the high 50's /low 60's to down around 36/36 but the dividend stayed the same. The Coke pile looked disasterous as it fell but at the bottom we bought as much as we could afford which I felt was a bargain at those prices being that the dividend never changed. This week KO closed at the 53 range and the pile looked better than ever. Coke is just one example of a number of blue chip dividend paying stocks that we own for our retirement. This is just what has been working for me in a very positive fashion and it is a relatively simple strategy. Once the money is in a stock in the retirement package we never touch it again and never take out any of the dividends unless they lower the dividend. So down cycles in the market that bring lower prices is a good time for us because we use the opportunity to load up on more of what we own at cheaper prices.

[billyjoe]

Ski,
Thanks for your thoughtful answer. I might be starting a new business shortly and if it works out I see no retirement in the future. Your point about the high div. paying stocks is a good one and something that I've been getting into lately. I took a 40% hit in 2000-2002 and don't want it to happen again. Real estate used to be a good alternative , but has totally gone to hell at least around here. It may take many years to recover. Thankfully I got a great deal on some land from someone who needed cash for stock purchases in the late 90's. It's now my ace in the hole. Land value hasn't been effected as has the housing market at least in semi-rural areas. Was just thinking about the good old/bad old days when a person could get 16% on a CD. We really don't want to see that again.

-------------billyjoe

[IIC]

Yes Real Estate is going down the tubes in general...However, apartment buildings may still be good...Rents are continuing to climb out here...LA, which is rent controlled, had a 3% max increase for many years...a year or so ago it was raised to 4% and I read in today's paper it is going to 5% soon.

As many people lose their homes they may be forced to rent which may continue to drive rents higher for some time.

[B.J]

Yes Real Estate is going down the tubes in general...However, apartment buildings may still be good...Rents are continuing to climb out here...LA, which is rent controlled, had a 3% max increase for many years...a year or so ago it was raised to 4% and I read in today's paper it is going to 5% soon.

As many people lose their homes they may be forced to rent which may continue to drive rents higher for some time.

I was THIS CLOSE to renting out my CA home, but last month, someone finally offered the low end of what I considered acceptable. Although renting out a house in LA would certainly have potential, it is not what I would have preferred. You never know what you'll get for a tenant, and the laws favor the tenants.

[IIC]

I was THIS CLOSE to renting out my CA home, but last month, someone finally offered the low end of what I considered acceptable. Although renting out a house in LA would certainly have potential, it is not what I would have preferred. You never know what you'll get for a tenant, and the laws favor the tenants.

True...I agree...But I had apartment buildings in mind

[billyjoe]

I sold a cottage near Lake Erie for 34,000 after the first 4 deals fell through and was lucky to get rid of it.

----------billyjoe