Monday, September 15, 2008

Are you buying or selling?

With today’s announcement that Merrill Lynch is being purchased by Bank of America, Lehman Brothers is filing for bankruptcy, and AIG needs to borrow $20 billion to stay afloat, are you buying or selling stocks?  That is, are you pulling money out of the market and waiting for less turbulent times.  Or are you upping your ROTH IRA and 401K?

What am I doing?  I’m buying like hell.  And if I had extra cash laying around, I’d be purchasing any number of stocks.  Remember, when a stock market crashes, smart people buy.  Buy low, sell high.  Or at least that is what I learned.

6 comments:

bosshart said...

I'm continuing to buy. It's against my instincts to invest hundreds of $ every month and still see my overall balance dwindle or stagnate. I invest heavily in foreign market index funds and was thinking about going more conservative until the economy rebounded. But then I heard my idol, Kai Ryssdal on Marketplace on NRP, talking to some smart guy regarding the asian markets in particular. He basically said that if you don't need your money anytime soon, now is the BEST time to buy. So, yeah, just what you said.

Mac Noland said...

I'm glad to hear that you're in the same boat as me. Recently I've upped my 401K and ROTH. Then started a 529 for my son and dumped a large sum in there.

Scooter said...

So did you verify your 401K is FDIC? I wasn't sure if that was done? And doesn't FDIC apply to overall money, not specific bank accounts? (i.e. you're insured to 50K period, not 50K per bank).

Scooter said...

I guess I should just read Wikipedia and I'd know :)

The FDIC insures accounts at different banks separately. For example, a person with accounts at two separate banks (not merely branches of the same bank) can keep $100,000 in each account and be insured for the total of $200,000. Also, accounts in different ownerships (such as beneficial ownership, trusts, and joint accounts) are considered separately for the $100,000 insurance limit. The Federal Deposit Insurance Reform Act of 2005 raised the amount of insurance for an Individual Retirement Account to $250,000.

Mac Noland said...

Scooter, I don't think a 401K is insured as it's invested in stocks/funds/bonds which are not insured. Is that your understanding?

Scooter said...

That was my understanding, which is why I was a bit startled to see that IRAs are covered for bankruptcy and by the FDIC, per wikipedia (below), and per the FDIC - http://www.fdic.gov/deposit/deposits/financial/categories2.html.

"In the case of Rousey v. Jacoway, the United States Supreme Court ruled unanimously on April 4, 2005 that under section 522(d)(10)(E) of the United States Bankruptcy Code (11 U.S.C. § 522(d)(10)(E)), a debtor in bankruptcy can exempt his or her IRA from the bankruptcy estate.[3] The Court indicated that because rights to withdrawals are based on age, IRAs should receive the same protection as other retirement plans. Thirty-four states already had laws effectively allowing an individual to exempt an IRA in bankruptcy, but the Supreme Court decision allows federal protection for IRAs. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 gave further protection to IRAs. Up to $1,000,000 of IRA assets can be exempt from a bankruptcy estate; this now includes both Traditional and Roth IRAs. The 2005 Act also increased the FDIC insurance limit for IRA deposits at banks"