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October 24, 2008

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This is what I've been saying to my friends and family since January. Glad to see someone else has my opinion.

You do not have to worry about your career. People will be sick in good times and bad. Healthcare is "recession-proof," and doctors still make 4-5 times the median income of the average American. I think understanding the position of a white-collar professional with a secure job extolling the virtues of investing makes your last statement ring true. P.S. I am a doctor and still do well despite the market

This market will not bottom until everybody stops asking "is this the bottom?"

You'll know when we hit the bottom -- it will be so quiet, you can hear a mouse fart.

Until then, keep high levels of cash, and trade the market opportunistically both ways, if you can. This is only year one in what I expect to be a multi-year decline (unless we crash to S&P 600 over the next couple of weeks). Sure, there will be rallies, powerful ones to, so powerful you'll feel stupid for not being fully invested.

But these rallies will fail, and we will work our way lower.

The only remedy to our economic malaise? Price (lower) and Time (longer).

This is no time for heroics, but a time for patience and capital preservation.

I agree that it's best to do the opposite of the crowd, and that now is the time to be greedy.

I just shifted my current and future holdings in bonds to a low expense S&P 500 index fund, and I plan on opening an individual IRA as well.

I know the market may go lower, but I don't think it's going to crash. As a young investor, I can afford to wait it out. Eventually buying when the market was at 9000 will seem like a bargain.

@aaktx - I think the best rule for all jobs is not to invest money in the stock market you may need within next 5 years e.g. if you lose your job. If your job is secure, your requirements for the amount of money you may need is higher. If your job is less secure it is lower.

@james - this is probably not the bottom. At the same time, I don't think that you can easily tell the bottom when it happens - did you know when it was the bottom after the internet bubble burst? As to multi-year decline - this is your opinion, it is not something we know for sure. Buffett doesn't think so, and his track record is pretty good: he told he was buying in 1979 and 1990 and he warned about market being over-valued in 1999 and 2004. Do you know of many times when he was wrong - not about individual stocks, he himself admitted that he made mistakes occasionally, but about time to buy and time to sell if you look ahead for longer than a couple of years. What is your track record so far?

Nobody really knows where the bottom is until after the fact. But if you miss first part of new uptrend, you may miss a very large portion of the gain.

I am not planning to invest my shirt in the market. But I am not selling either. During next few months I may start buying some selected stocks.

A typo in my previous post. When I said "If your job is secure, your requirements for the amount of money you may need is higher. If your job is less secure it is lower.", I obviously meant the opposite - if you may lose your job you need to keep more money safe.

Invest in different types of financial securities can diversify the risks associated with it, buying bonds is an alternative choice. Careful planning of personal finance is an important element in our life.

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