If you listen to some people, you will actually hear many of them tell you to take all of your money out of the market. I overheard it in a coffee shop the other day, my wife and I heard it last night at dinner, and a reader sent me a link to an article that had Jim Cramer, the crazy money guy on CNBC, “urging any investor who has money they may need in the next five years tied to stocks to pull their dough out.” All of it? A money guy on TV is telling people he doesn’t know to pull every dime out of the stock market if they happen to need it in the next 5 years? I am no financial adviser, but that seems rather crazy, no?
If you have money in the stock market that you might need in the next 5 years, you are gambling. There is absolutely no reason that you should have money in stocks that you will be needing in the short-term! Our house money is over at ING earning some lowly amount of interest – but at least I won’t lose the principal in the time being. If I had been keeping our downpayment account in stocks, I would have lost a rather large percentage of our savings already. I will say it again – do NOT keep money you will need in the short-term in the stock market. That being said…
I believe that any person going on TV and telling uninformed viewers to head to their broker and ask that all their money be taken out of the stock market is irresponsible. Not everyone watching is a savvy investor who thinks he or she knows what they are doing; some of them just want to watch Cramer blow a fuse and watch the veins pop on his forehead. Telling everyone, irregardless of circumstance, to take their money out of the market if they need it in 5 years is not responsible advice! You cannot make a blanket statement for everyone watching a financial news show, and that is exactly what Cramer did. And whether or not you should be getting out of the market is one thing; but him telling you to get out without knowing you is just wrong.
So no, you probably should not be pulling all of your money out of the market. I lost a lot of money in the last 2 weeks – and it will take a long time to get it back. 50% in losses requires 100% in gains to get it back. The good news is that I am 36 years old, far away from retirement, and my short-term money is in a safe account. But individual circumstances differ, so if you are older and closer to retirement, might need your money earlier for whatever reason, or have some other concern, I suggest you talk to your broker/adviser. If you don’t have one, find one. But do not take blanket advice from a guy on TV.