Should we Invest in Stocks or Cash is King?

[This post is written and copyrighted by FIRE Finance (]

In the past couple of days we have seen a spike in the stock market. The cause is the rosy picture of hope painted by the news of Citibank's profits. Apart from that the market has experienced one of its all time lows. Years of hard earned wealth has disappeared within the blink of an eye - just like that!

In this scenario it is hard to have patience and keep faith in a market and political scenario when most of us don't have a clear understanding as to what the future holds for us. Also, the dwindling value of our portfolios have made most of us wonder like Eric did:
Should we Invest in Stocks or Cash is King?I've been sticking with my investments in the hopes that the market will recover, but I'm tired of seeing the value of my portfolio continue to drop. Should I just sell everything, put the proceeds into money-market funds and bonds and wait until we see an upturn before getting back in the market? Or should I hang in there with my present portfolio of stocks and mutual funds? Eric Rosenberg, Little River, South Carolina
Money Magazine's senior editor, Walter Updegrave, has answered Eric in details. His advice is based on the investing time horizon of an investor. If you are young and have a long term investing goal, its good to stay put with a well diversified portfolio. But if you are 60 and close to retirement then it'd make sense to turn your investing dial towards bonds and cash to preserve your capital.

We'd like to add our two cents to Walter's advice. Common sense says that we should put a stopper on the decline of our portfolio's value. We feel that if we are able to stomach a loss of say N (for example 30%) percent, and our portfolio declines further, then it is perhaps sane to take our money out of the stock market. After all we do not have an infinite amount of money to invest. But that is us :). What do you feel? Leave a comment with your thoughts :).

You can follow the entire story here:

Image Source(s): iStockPhoto

Related Posts