I sometimes forget that people really don’t understand the financial markets as well as they should.  That’s very understandable.  I don’t understand everything it takes to build a road, as much as I should. 

There are so many things to know; we can’t know everything.  When I posted a message about getting out of the markets, I received a comment that reminded me that not everyone was up to par on what is about to happen and how that will affect them.  

Here is why getting out now is a good thing, and why staying in “for the long haul” is a bad thing.

Assume you have $10,000 in stocks.   If the stock market drops 40% as it is prone to do, it will be years before it gets back up to its level.  On the Dow Jones a 40% drop would be like going down to 9000 to give you an idea.  That can happen in a day, and with most IRA’s, you have to put your bid in one day and it comes out the next.  You could do it now, and if it crashes tomorrow still lose it all.

Which is why you should act today, Friday, and take a chance on Monday.

If you don’t.  here is what will happen.   That $10,000 could become $6,000 by next Monday afternoon.  But you are in it for the long haul, right?.  Again after 2 years of  awesome 30% growth,, that money-total of yours has again climbed up to $10,000.  No big deal you shrug. You were in it for the long haul. You lost nothing.

Now, the other side of the story.

You switch the $10,000 right now over to a Treasury bond fund.  There is not much growth, so it stays at $10000 for a while.  Of course, everyone else has lost 40% but you are steady.  

So when the market stops losing and starts bouncing back, you go in at the bottom. with your full $10,000.   After 2 years of 30% growth, you have $16,000.  Had you stayed, you only had $10,000.

That is why, both those who are smart and unsmart should get out of  the stock market now.

In layman’s terms its the equivalent of protecting your property upon notice that Superstorm Sandy is headed for Delaware’s shores.  You can take your chances that it will blow over and do nothing….. you could be right if you are very lucky.  or you could hedge your bets and with little or no expense, and just a tiny bit if effort, protect your assets from any damage that could occur…. 

Just saying that an economic superstorm of gigantic proportions is headed your way.

 

 

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