For about a year now I have been feeling uneasy about the stock market. Things just seemed to be too good. About a year ago I stopped putting new money into stocks, and although money markets were basically yielding nothing, I kept putting more and more money into that asset class. Now it appears that some of the storm clouds have burst open and the market has taken a hammering this week, reminiscent of some of the worst of the 2008 meltdown. Having said this, unlike in 2008, I am not feeling a sense of impending doom. I am actually optimistic about the prospects for the US economy, now that the insane debt ceiling crisis has been resolved for the time being (may the Tea Party idiots pay the price at the polls).
Don't get me wrong, I think we are in for a little bit of a bear market, but my point is that if the market declines another 5% or 10% I will start reinvesting money in stocks. Not large amounts, and not crazy bets, but a fixed, measured amount of money going into index funds every month. I followed this strategy during the worst of the 2008 stock market collapse and it yielded outstanding returns. When everyone flees the market, that's when I feel the time is right for sober, calm investors to slowly but surely wade in. Yes, short term losses can be severe, but over a period of years, buying in a stock market bear market is a fantastic opportunity.
I love buying things on sale. :-)
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