Let's Raise Some Cash
Posted by Gregory Guest at 9/11/2009 1:50 PM 
Categories: Market Alert
Tags: Selling Stock Bear Market
Categories: Market Alert
Tags: Selling Stock Bear Market
Market Alert: 2009-09-11
I am still extremely concerned about the ability of the U.S. stock market to maintain its current "pricey" valuation. Due to the strong recent gains in gold mining shares, China and other holdings, my portfolio has had a very strong swing to the upside lately. When looking at my portfolio this afternoon it was almost too hard to believe that we ever had a 55+% drop in the markets in the past 23 months since my holdings have recovered nicely and better than the stock market in general. Remember, the S&P 500 is still down more than 30% from its all time high that was reached in the fall of 2007.
A rising stock position can be a little dangerous if you are not keeping your portfolio in check, especially in a secular bear market. As stock holdings increase in value, the percentage of an investment portfolio that is dedicated to cash decreases unless you sell some of your equity gains. As of today my cash allocation had decreased to only 24.5% of my portfolio; that is too low in my opinion given the current market complacency and lack of growth potential and economic guidance. To get my portfolio back on track, today I am selling a nice chunk of my S&P 500 index fund and some of my Munder Mid-Cap Growth Fund (I only own the Munder fund because it is one of the few decent options in my 401k plan, not because I love it or anything) to increase my cash position by nearly 25%....in other words, as of today's close I will have 30.5% of my portfolio OUT of the market. I may sell more equity shares to raise additional cash later, but at least now over 30% of my portfolio will now be sitting in cash so that I can buy more equity shares at lower prices if, and really when, we get my much anticipated market correction.
I encourage everyone to check your portfolios as well to determine whether or not you are comfortable with your current allocations. Do you have enough cash on hand to benefit from a market correction? If not, you may want to hurry up and start raising a little cash now so that you will be able to buy stocks back at lower prices later on.
Gregory
I am still extremely concerned about the ability of the U.S. stock market to maintain its current "pricey" valuation. Due to the strong recent gains in gold mining shares, China and other holdings, my portfolio has had a very strong swing to the upside lately. When looking at my portfolio this afternoon it was almost too hard to believe that we ever had a 55+% drop in the markets in the past 23 months since my holdings have recovered nicely and better than the stock market in general. Remember, the S&P 500 is still down more than 30% from its all time high that was reached in the fall of 2007.
A rising stock position can be a little dangerous if you are not keeping your portfolio in check, especially in a secular bear market. As stock holdings increase in value, the percentage of an investment portfolio that is dedicated to cash decreases unless you sell some of your equity gains. As of today my cash allocation had decreased to only 24.5% of my portfolio; that is too low in my opinion given the current market complacency and lack of growth potential and economic guidance. To get my portfolio back on track, today I am selling a nice chunk of my S&P 500 index fund and some of my Munder Mid-Cap Growth Fund (I only own the Munder fund because it is one of the few decent options in my 401k plan, not because I love it or anything) to increase my cash position by nearly 25%....in other words, as of today's close I will have 30.5% of my portfolio OUT of the market. I may sell more equity shares to raise additional cash later, but at least now over 30% of my portfolio will now be sitting in cash so that I can buy more equity shares at lower prices if, and really when, we get my much anticipated market correction.
I encourage everyone to check your portfolios as well to determine whether or not you are comfortable with your current allocations. Do you have enough cash on hand to benefit from a market correction? If not, you may want to hurry up and start raising a little cash now so that you will be able to buy stocks back at lower prices later on.
Gregory
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