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With the threat of Govt Shutdown looming, is it wise to take money out of stock marke

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P

perryfarrell

Member
Short answer: No. Long answer: Fuck no.

This gov't shutdown will be fairly inconsequential, just like 99% of other things Washington does.
 
G

Gannd

Banned
Mutual funds are designed to be long term investment vehicles. Talk to a qualified financial advisor. If you're an investor you invest for the long term.
 
A

Ace 8095

Member
If you have to take financial advice from your wife then actively managing your money is probably a bad idea. Just let it ride.
 
F

FireAndBlood

Member
I work for a large international brokerage firm. Yeah, the stock market will take a hit, then it will rise back like it never happened. I wouldn't withdraw money because you'll be taxed on your gains.

Want to make money off it? Short the market.
 
M

Manmademan

Member
RustyNails said:
When I told my wife that teapartiers are going to shut the the government down over obamacare, she told me to take money out of stocks and mutual funds. Is this a valid concern or should we wait and see? Theres also the threat of defaulting on our debts by not raising the debt ceiling. I am worried. Advice.
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Good lord no. NEVER yank your money out of the market like that.
 
O

Opiate

Member
RustyNails said:
When I told my wife that teapartiers are going to shut the the government down over obamacare, she told me to take money out of stocks and mutual funds. Is this a valid concern or should we wait and see? Theres also the threat of defaulting on our debts by not raising the debt ceiling. I am worried. Advice.
Click to expand...

This is a great example of how hard it is to beat the market. The problem with your analysis is that other investors have considered the same thing, and some have already dropped out -- thus the price of a possible government shutdown is significantly "priced in" already. Not entirely, but significantly. Another way to say this: the price of a major stock already reflects the possible future outcome that the government shuts down.

The time to really pull out is when the government unexpectedly shuts down. As in, everything seems fine today and then suddenly out of nowhere the government stops working tomorrow. That would be a situation where the possibility of a government shutdown has not been factored in to the market price and you can really expect a dramatic, sudden drop in total market value.

But as it is, I wouldn't recommend it. If there is a government shutdown, expect a noticeable but not catastrophic temporary drop; if the government doesn't shutdown, expect a modest but more long lasting boost. These sorts of obvious, probabilistic considerations are factored in the NYSE long before they happen by people who do this for a living and who are privy to a lot more information than either of us are.
 
R

RustyNails

Member
Opiate said:
This is a great example of how hard it is to beat the market. The problem with your analysis is that other investors have considered the same thing, and some have already dropped out -- thus the price of a possible government shutdown is significantly "priced in" already. Not entirely, but significantly. Another way to say this: the price of a major stock already reflects the possible future outcome that the government shuts down.

The time to really pull out is when the government unexpectedly shuts down. As in, everything seems fine today and then suddenly out of nowhere the government stops working tomorrow. That would be a situation where the possibility of a government shutdown has not been factored in to the market price and you can really expect a dramatic, sudden drop in total market value.

But as it is, I wouldn't recommend it. If there is a government shutdown, expect a noticeable but not catastrophic temporary drop; if the government doesn't shutdown, expect a modest but more long lasting boost. These sorts of obvious, probabilistic considerations are factored in the NYSE long before they happen by people who do this for a living and who are privy to a lot more information than either of us are.
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I see. I should keep this in mind whenever republicans start playing with fire.
 
G

GhaleonEB

Member
Cyan said:
The time frame question is more about what the money is for. 401k is retirement money, which is presumably a very long time frame. Don't worry about these short term events; the effects won't even be noticeable in several decades when you cash out.

The mutual funds could be short term or could be long term. It depends on what you plan to do with that money. Is it a kid's college fund? That's probably longer term. Is it for buying a house or a car? That's much shorter term. That's really what people are getting at--the longer from now you're planning to cash out, the less likely it is that a market dip will have any effect on you.
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To add to this, the best way to account for the different time horizons for your investments is to make those horizons a factor in the investment plan itself. With a shorter-term investment, where a stock market drop would be a problem, it might make sense to hold that in assets that are themselves less volatile (cash, CD's, bonds, and so on). For longer term investments, less so.

For example, my Roth accounts (IRA and 401k) are mostly stock indexes, with a bit of bonds. The kids college funds are a richer mix of stock and bond indexes, as are our mid-term savings funds. For things we plan to buy in the next 1-2 years, we set aside cash. In all cases we ignore market fluctuations and news.

In doing so you eliminate the need to try to time the market regardless of your investment objective. (And as Opiate said, timing the market is something that is not likely to be met with success.)
 
C

Cyan

Banned
RustyNails said:
I see. I should keep this in mind whenever republicans start playing with fire.
Click to expand...

Opiate nicely summarizes the efficient market hypothesis here. It's a good general argument against ever trying to time the market. Without special insight or knowledge, there's just no point. Waste of time and energy (and probably money, depending on fee structures).

Assuming you believe the efficient market hypothesis (and you should), there's an obvious conclusion as far as the best way to manage your investments. Buy when you have money you want to invest, sell when you want some liquid funds, and generally just ignore what the market is doing. Plan (and change) your allocations based on how long you expect it to be before you need to pull your money out of the market to use for something.

Edit:
And see Ghal's post above for a good summary of time horizons and allocations.
 
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