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Sunday, January 6, 2008

Investing in a Falling Market

Like many people, I don’t believe 2008 is going to be a great year for equities. Between the election, the war, oil prices, and the subprime fallout, there is no reason to expect equities to take off.

With these expectations, I have a plan.
1. Taxable Accounts: Because I don’t believe my cash cushion is adequate, I don’t “invest” taxable money. 100% of my free cash flow goes into extremely safe vehicles (savings accounts, CD’s, money market) or debt reductions.
2. Retirement Accounts:
a. IRA: Almost 90% of my portfolio, it is invested roughly 30/30/30% in a ST Bond Fund, a MT Bond Fund, and a Foreign Equity Fund. The remaining 10% is in cash.
b. 401(k): Despite the tough expectations, I will invest 100% in a diversified portfolio of equity funds. Basically, I will treat the company match as insurance and hope to benefit from a long term increase in world equities.

1 comment:

Boomer said...

I like your choices. Last year I put 40k in the stock market. Now I have 36k. I put 40k in a CD and guess what? I still have 40K plus the 5% compounded interest.
Go slow. Things are going to get very bumpy.