AFP: Down 30 Percent In 30 days, Is Now The Time To Buy?
By Simon Maierhofer
SAN DIEGO (ETFguide.com) - Imagine this, you are in Las Vegas, a bouncing ball eventually resting on red just set you back a hundred bucks. Should you walk away or stick around for another round of Roulette, trying to get even-steven?
The latest bear market leg has created a lot of “buy-and hold” or “long-term” investors. To be clear, this is not by choice. It’s simply because investors are hesitant to turn their paper losses into actual losses. Paralyzed by the market, most 401(k) and IRA owners are sitting on their hands hoping for better times.
To put things into perspective, the Dow (AMEX: DIA) lost 25% in less than 30 days. The S&P 500 (AMEX: SPY), which has a higher exposure to financials, shed 27.5% in the past 14 trading days. The massive 3497 holdings strong Vanguard Total Stock Market ETF (NYSEarca: VTI) fared slightly better with a 23% loss.
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Clearly, this correction is not just a mere “hick-up” in a bull market. This bear is strong, mature and hungry for more as it has shown by breaking through support levels like a knife through butter. A record 2.99 billion shares traded on September 19, but this intense selling pressure will have to be relieved at some point.
What to do now
Here is what you can do NOW. Analyze your portfolio. If your portfolio is falling faster and harder than the major benchmarks, you have some work to do. Compare your portfolio to the iShares Russell 3000 (NYSEarca: IWV), the iShares Russell 2000 (NYSEarca: IWM) or the iShares Russell 1000 (NYSEarca: IWB). The bigger the gap between your portfolio and the Russell (or any other major) Index, the more work there is to do.
Don’t panic
If you haven’t done anything yet, don’t panic and don’t succumb to knee jerk reactions. A 40% correction deserves a respectable counter move. I would not necessarily recommend to actively trade into this move, but if you are looking for a better price point to lighten up on your U.S. ETFs and funds, chances are you will get it before the end of the year. Don’t be fooled into “everything’s all right” again when prices up.
