I don't care how old you are. When there's a 70% chance the stock market could fall 20% or more, you are looking at the face of risk and not opportunity. In times like these any truly risk averse retirement investor should have little, if any, of their 401(k) capital exposed to the stock market. Switching one's investments to safe money-market alternatives should be a no-brainer.
This, I believe, is both how to stay on track to retiring when you want (if not sooner) and forever keeping your net-worth growing at a pace faster than inflation. This is how to defend the purchasing power of your savings.
There is right now a 70% probability the S&P 100 will fall approximately to the area of 520. As you know I believe a mini-collapse is imminent. I think this could go down looking like late-stage declines in 2001 and 2002. I also believe the fist bounce off bottom will be similarly sharp.
Here is why I think a truly risk averse 401(k) investor should consider stepping aside the stock market: I might be wrong; the stock market could just as well fall farther than I presently think likely.
Yet, even if stocks do not decline as much as 20% over the next several weeks, you will not lose a thing by stepping aside. You pay no capital gains taxes moving your 401(k) capital from one investment alternative to another. That is the beauty thing.
So, this recommendation is just for the record ... and for your edification. Risk is risk and opportunity is opportunity, no matter what your age. Right now, the stock market simply is risky.
And it is, after all, your money and your life's dreams that are at stake...
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The Risk Averse Stock Index Options Alert advocates a patient, disciplined approach to stock index options trading. The overriding objective is limiting one's financial risk. Minimizing investment capital loss is a priority.
Recommendations target the stock market's path of least resistance. Call and Put options alike are used when the stock market is moving along its projected path.
Nothing is set in stone. Nor is the stock market's path of least resistance always known. More often than not, there are no stock index option positions recommended.
4 comments:
Move from stock market to where ?
Park your capital in a Money Market fund. Bear in mind, this is only a temporary move. You are seeking safety until present risk in the stock market passes.
Once this present risk is behind us, then switch your 401(k) capital back into a position giving you a diversified exposure to the stock market.
One thing you will want to know before you do this is the limit your 401(k) plan manager places on your account activity. If you are able to switch your investment allocations at least once a month, then I recommend you presently shelter your capital as I have recommended here.
Hi TC,
If you post an option recommendation will it be reflected in your end of day commentary as a lagging recommendation so that we would be opening the same position, but one trading day later than you? Or will it be fresh for the next day?
Bernie
Bernie,
I am venturing to issue my recommendations in real time using some sort of Instant Messaging facility. However, I have not yet settled on how best to go about doing this.
Right now, I can issue real-time recommendations only via e-mail.
You can get on my notification list by e-mailing me at TGolden21 (at) gmail (dot) com.
I will continue posting my "quick hit" trade recommendations at the end of each day these are issued. I would like this record principally to speak for the infrequency of options trades I advocate ... over the long-term.
Per the pending opportunity to multiply one's initial $500 stake into some 5-6 figure windfall, I am not yet sure how I will go about publishing the record of recommendations I anticipate making over the the next several weeks. Obviously, I will be discussing positions in my daily posts. Yet, I would like to avoid the complication of readers coming into the play mid-stream.
I am rather intent on maintaining the discipline of initiating every OEX options speculation with a tiny $500 stake. Bear this in mind. During the more prolonged market move I am anticipating, there will come a time when we are laying thousands of dollars on the line. (Of course, by that time we will be playing entirely with the house's money; our initial $500 stake, if not more, will be off the table.) So, I am reluctant to post each trade recommendation during this period. I simply do not want to be misleading anyone who might come in sometime after we have already begun the trade.
So, send me an e-mail and I'll give you real-time notification. Make the subject "Risk Averse Alert Me." It's all very informal...
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