What is the safest place to move your money after you sell stock shares during a market correction?
I have an aggressive mix of stocks, including a couple of mutual funds and an exchange-traded funds (ETF). Where is the best place to move my money after I sell shares of these stocks during a correction?
The "safest" place to hold your funds would be in an FDIC-insured account. I'd recommend using an on-line bank as their rates tend to be higher.
Also, be careful about trying to "time the market". I have yet to see someone who has successfully done so (moving out and back into the market at the "right" time) consistently. I'd recommend finding the asset allocation and risk profile that works for your risk tolerance and capacity, then rebalancing periodically. Studies have shown this to be the best long-term investing strategy.
Best of luck to you!
You need to know on what basis you are calling your portfolio aggressive. By the time most realizes that the market may have gone through a correction, it is perhaps ready to rise again. Your question is therefore really not very well defined so that one can intelligently answer it. In general, if you have more than 7 years to invest, buy value through real good research, and hold your investments through market peak and troughs. From technical and economic indicators, it is often possible to call a market bottom. If you can do that, buy more of you value stocks during that identified bottom.
Like most advisors, I agree that you should not try to time the market. However, there is a difference between timing the market and pulling out during severe uncertainty (2008). I think the best place to keep your money during times when not invested or severe uncertainty is probably in high-yielding savings account that is FDIC insured. You just need to pick the one that is most comfortable and suitible for you. If you are day trading, just keep the cash in your brokerage account which will probably pay little to no interest...there is no need to cry over spilt milk.
Good luck and happy picking.
As with any investment question, the answer should start based on your answer to: what is the purpose of this money? If the ultimate use is for retirement in 40 years, the answer should be completely different than if the purpose is to use the funds for the down payment on a house in two months. So that's where I would start.
After that, we like to think of savings and investments in terms of three different options:
1. On one end of the scale are growth or risk investments. You've already identified that you've sold these and are looking for something "safe," so this wouldn't be the right spot for the proceeds.
2. On the other end of the scale would be accounts that offer safety and/or some type of guarantee. Generally, we would include FDIC insured bank account, US issues like savings bonds, and fixed and fixed indexed annuities. Any of these could be a fit for you based on your goals with the money.
3. Finally, we also consider a middle option - we call it steady income. These investments are not guaranteed, but they are designed to reduce or eliminate the volatility associated with the stock market. They often pay dividends - perhaps anywhere from 4 to 8% per year. If you're not familiar with these, google information on endowment-style investing, and you'll find a great deal of information to learn more.
I hope this helps - wishing you the best of success!
One of the ongoing problems for investors is their tendency to buy high and sell low. Indeed, the annual study by Dalbar regularly shows that the returns of mutual fund investors substantially lags typical fund returns. Rather than thinking about where to go after selling shares of stock during a correction, it will probably be helpful to take a hard look at your overall asset allocation. This should include U.S. stocks, International (Developed Countries) stocks, Emerging Markets stocks, Fixed Income, and Alternatives. All of these are available through exhange-traded funds. Given the continuing rich valuation of the U.S., people should consider shifting allocations abroad, where valuations are one-third to one-half lower along with better long-term growth potential. In addition, to provide current income and increased portfolio stability it would be a good idea to hold deep-discount closed-end bond funds as well as short-term high-yield exchange traded funds. The latter two provide current returns of mid to high single digits. In the alternatives area, you might want to look at exchange-traded funds with covered-call, covered-put or long-short strategies. With the prospect of more moderate gains and increased volatility ahead, a more diversified portfolio may well generate competitive returns with significantly reduced interim fluctuations.