Fat Cat says RRRAAAAWWWWWWWRRRRRR!!!!!

After the financial meltdown, many are predictably afraid of the stock market.

The long 25-year bull market has run its course, and we are now in a period like the late 60s-70s where the market just moves sideways (or worse) for a decade or more. If it hasn't sunk in yet, you can't just keep putting money into your 401k and expect it to grow reliably. It may for a while, but then it will plunge back down a few months or a year later.

But if you have a 401k, you probably have few options aside from stock market mutual funds.

I know this seems controversial right now, but I am a fan of statistics-based computer trading. There are dozens, or maybe hundreds of such systems, available by subscription. You sign up, and get emails telling you when to get out of the market, and when to get back in. This works fine with most mutual funds and retirement plans.

Timertrac.com is a site that reviews such systems in real time, by tracking the same signals sent to subscribers. It is a pay service, but if you just Google 'timertrac' you will find many free links to charts of various timing systems.

Here are two examples of timing systems. Both of these are free: [sniper.at] and [tradewhen.com]

Both of these systems just issue a few signals per year, and you would access your investments and move them back and forth between stock funds and money market (or a short-selling fund, if you are a bit bolder.)

When clubbing, figure out beforehand, when sober, how much you will spend. Take that $$ out in cash. Leave your plastic at home.
Nothing cures the "I'll buy this and the next round" impulse faster than imagining having to beg random, passing strangers for loose $20 bills. Or worse, sexual favors (in LA, the sex is cheap, it's the cocktails that are expensive).

@Apeweek: Ho ho ho.
There's no free money on Wall Street. Any scraps are already picked clean by professional staffs who work 60-hour weeks to discover such finds.
Broad-based index funds that have low fees, with the expectation of a long-term payout.

New Years resolutions are excellent as long as there is follow thru. I think most people have to make financial resolutions this year. Spend less. Save and invest more. We need to get back on track to creating long term wealth as we have seen the worst wealth destruction in decades.

I am a contributor on http://thecreatingwealthblog.com

@Trai_Dep: And never open a tab. Just pay as you go. When your pockets are empty, that's the end of it...but you don't want to run up a $50 tab and only have $40 in your pocket.

@Trai_Dep:

I'm a fan of index funds as well- the "random walk down wall street" theory.

If you want to play with market timing with money you can afford to lose, that's fine. But doing it with your retirement funds, not so much.

@Trai_Dep:

No, of course there is no free money on Wall Street. Most statistical timing systems are indeed quite expensive. But there are always new product introductions, so it is possible to find a few good trading systems that are cheap or free at any given moment.

This is a cliche thing to say, but 'wake up'! Look at your index funds. How far have they fallen? When will they get back up to where they were? This is what you want more of? This is not the 1990s, so get out of that mindset.

Take a look at the performance of stocks in the years prior to the long bull market. That's where we are now. There will be no 'long term performance' for 10 years or more, at least not in mutual funds. You can pick individual stocks if you're good at it, but it's a lot tougher now to find winners.

Wouldn't you have liked to get your money out before the crash?

I'm not asking for blind faith here (like the index funds are!), instead look at real charts of how these statistical systems have performed through the crash.

Here's just one example (this is one of the free systems, as verified by Timertrac):
[tinyurl.com]

I don't do new years resolutions...but I know that 2009 is the first year in which I'm officially financially independent, and out from under my parents' umbrella. It also means that things will get much harder because the economy isn't looking to be all rainbows and puppies. I'm funneling money into a 401k, and I'm transferring money every few months to high yield savings. I'm cancelling and/or modifying certain subscriptions so I pay less, and I'm cutting back on spending.

Money cat sez: Iz take care of monies now cuz mi hooman fail.

@madanthony:

A curious idea of safety, indeed.

How ironic that you want the "money I can afford to lose" in computerized market timing - when my favorite system is up almost 100% last year (verified, see the link in my other post - change the setting to 1 year to see a graph.)

And you want the "money I can't afford to lose" in an index fund - most of which have lost 30-50% of their value. It's hard to imagine anything more dangerous than doing even more of this.

By the way, the system I use DOES have me invested in an index fund. Except I get a warning when it's not safe, so I can get my money out, or trade short.

Haha. "Think like a CEO." I shall do my best to destroy the company I work for for my own profit.

I'm glad the new overlords haven't taken away the cat pics. :-)
Keep 'em coming.

@madanthony: A good point. I have play money that I buy individual securities with. But as you point out, for your baseline nest egg, greater caution is required.

@Apeweek: But if we're speaking of asset allocation for retirement, we're talking about a long window. So low share prices = more shares purchased during the down years, which will correspondingly compensate once your funds are withdrawn.
Have you learned nothing from the outcome of the day traders of the late '90s? Are your brand of sparkley unicorns really that much different than theirs?
And, please people, when discussing this, don't link to other sites as it looks an awful lot like spamming to increase their traffic. We should be able to discuss this thoughtfully without shilling the dozens of Make Money Fa$t sites out there. :)

@Foibles and Weebles: Yup. It's a brutally efficient system, since when you're besotted and sloppy (but OH so charming), and you're tapped out, you can simply shrug to your erstwhile alcoholics in training and say, "Your turn to pay up, chumps!" Followed by, "Did I say 'chumps'? Chums. Chums, I say. CHUMS!"

I've seen the face of friends breaking both rules (plastic and running a tab) at the same time and it's not pretty when they get their $150 bill...

Yay, first Consumerist Cat of 2009!

Erm, can we either get a poll going*, or will you simply knuckle under to reader demand, preemptively admit defeat and post a recent picture of Captain Duvel Moneycats. Jeesuz, fellahs, it's been far too long. I fear Ben & Meg have traded him for a Chihuahua or a Jack Russell. Or that he's grown so obese that a normal lense can no longer capture his mighty girth.

Bonus points if he's nom nom noming over a vat of Perfect Oatmeal. With a clickable button that plays his purr purr purring sounds while he's shamelessly devouring.

* Fun! Interactive! Page-view churning!

@Apeweek:

A one-year window isn't enough period of time to draw a valid conclusion that anything works. If I look at home prices from 2005-2006, I can conclude that everyone should buy a house because they go up in value 20% a year. If I look at them from 2007-2008, I can conclude that nobody should buy a house because they drop in value 20% a year.

There have been numerous studies that have shown that specific stock picks almost never beat index funds long-term. I suggest reading books like Fooled by Randomness on this subject.

Yes, my 401k took a dive this year. It did well in years before. Given that I'm currently 28 and won't be retiring for at least another 40 years, it will go up and down numerous times before I'm ready to retire. One of the tips linked above was that you shouldn't keep checking your 401k- for exactly this reason. I'm invested for the long term, and I'm not going to look at one year's earnings and panic.

@DanC922: Think like a CEO: "Where's my tax refund?!"

@Trai_Dep:

First of all, please pay attention - I am not a day trader. I move my money only about three times per year. This is easy to do even inside a retirement account.

Yes, my "sparkly unicorns" are better than theirs (and yours), because it is based on real results. Note that I am not trying to time the market myself - about 90% of people who try that fail. I am subscribing to tested and functioning automated computer-based systems.

I appreciate that I should not really be linking (which is why I linked to free systems, not paid ones.) But do me a favor, click on my username above to see my posting history here. Scroll down and look at my posts on this topic back in September, BEFORE the crash. Back then I mentioned three timing sites - Equitrend, Tradewhen, and Sniper. Go to their websites, and check out their performance. ALL THREE of these systems protected their subscribers from the subsequent market crash. ALL THREE of them did!

That's why I'm evangelizing about this. I am sitting pretty on my retirement money. Are you?

Ultimately, my goal is the same as yours - safety of my money. That's what I'm talking about. I hope this is sinking in. Moving your money out of the market during the riskiest times is NOT a dangerous strategy - leaving it IN is!

I agree, these down years are indeed a good time to buy shares for the long haul. But what if recovery is 10 or 20 years out? Again, LOOK at what the market did in the 60s, or what it did after the depression. This is NOT THE 1990s. Your past experience in the market is meaningless.

* Use time effectively.

There go a lot of consumerist.com page views.

@madanthony:

This is definitely not based on just one year of results. I am hampered a bit here by my choice to link to free systems. They are free precisely because they are newer to the marketplace, hence the verified performance is shorter. Here's a longer term chart from the same system I linked to earlier - the barely visible red line at the bottom is the performance of an index fund:

[tradewhen.com]

Also, look at my post above - click on my username and look at my old posts like I suggest there. I really used this strategy to survive and thrive through the crash.

"New Year's resolutions" are an idiotic idea. You only wait for a specific date to undertake something large and important if you have no choice about when it starts (e.g. a college semester).

If it's worth undertaking, it's worth starting anytime, not waiting for January 1st.

Ironically, i do most of these things... my one weakness is splurging... I need to stop splurging... Make it stop. Make the Bar tabs stop...

@Trai_Dep: One of my friends started a tab, and after a few drinks and a round of dancing with strange Spanish men, she realized that she had racked up $60 in drinks because she insisted she pay for our drinks...

@Foibles and Weebles: i once racked up a $300 tab on a card. funny thing is, i only bought 3-4 pitchers ($5/ea.) & about 12 shots ($5/ea.). ever try arguing with a barkeep about drinks that you never ordered ending up on your tab? if you haven't, let me fill you in on something: it either ends with you paying the tab or going home in a police car. YAY!

so, that's why i only pay cash & only run a tab in bars where the keep knows me. you live, you learn, right?

@Trai_Dep: judging by the size of the cat in this post, i think it's quite possible that fat cat nom nomed the good capt.

@Apeweek: "The long 25-year bull market has run its course, and we are now in a period like the late 60s-70s where the market just moves sideways (or worse) for a decade or more. If it hasn't sunk in yet, you can't just keep putting money into your 401k and expect it to grow reliably."

Yeah, but what the hell does that actually mean for people like me who won't be allowed to retire, and thus touch without penalty our 401(k)s, until 2040+ ?

It means buy sensibly and consistently and as much as you can. Now. And for the next decade or more where the market is just moving sideways, thus at a discount value to where it will be in the two decades beyond that. Or, of course, it might not ever get there in which case we're screwed and the money we threw down that hole is worthless anyway.

I agree with your sentiment that it's important we all understand the market isn't a get rich quick scheme, but I've made some modest money on trading bond ETFs when they hit their October lows, undervalued by like 14% and crazy things. I'm far from an active or short term trader, but even in a crappy market like this sometimes self-evident values come along, and it's incumbent on us to keep after it, lest (or in spite of the fact that) the whole house of cards comes down.