“As one who has so often recited the mantra ‘you can’t time the market,’ how do you justify your April 17 column? Isn’t the right answer that, especially for a retirement account (depending on the age of the investor), one should stay the course — perhaps adding, as you suggest, real estate to the portfolio but definitely NOT moving to money market vehicles in a futile attempt to time some future market rebound?”

I guess the short answer is that there are exceptions to every rule. (And “especially for a retirement account” the exception is easier to invoke, because it entails no tax penalty.)

If everybody put all his/her money into the market, and Social Security put its trust fund into the market, and the Chinese realized the way to get rich was by investing in the U.S. market, and the Dow hit 30,000 by next June — surely even then all of us who have said “don’t time the market” would agree that it’s time to lighten up.

So then the question becomes: when do you draw the line? The reader said he wanted to be out of the market, and I neither encouraged nor discouraged that, just tried to respond to his question about where to put the money.

But the kind of reader with a question like that may be just the kind of reader who very likely SHOULD get out. Staying the course is only good advice for people who really will (and, at these levels, perhaps not good advice, in tax-sheltered accounts, even for them). There are millions of relative newcomers to the market who’ve gotten used to its amazing performance over the last decade and a half. Let’s say I had discouraged this fellow — “Don’t sell!” — and let’s say we have a “regression to the mean,” where after 15 years of way-above average performance, the Dow dropped 40% and stayed there for a few years, putting it back in line with its historical long-term growth.

I’m not predicting that. I’m really not. But it’s certainly not out of the question. Do you think people like the reader in question would just patiently hold on an extra ten years? All my experience tells me that, typically, he would not; he would sell at the bottom . . . and be really, really angry I had talked him out of selling.

I did advise in PARADE several weeks ago (when the Dow was over 7,000) that those who have profits that can be taken without tax consequences in retirement plans might want to move half their holdings into short- to intermediate-term Treasuries and/or international equities.

I don’t usually do that — you’re right. But all I can do is offer my best judgment. If I’m wrong, it won’t be the first time!



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