Two weeks ago, I started reducing our stock investments in our retirement accounts to pre November 2010 levels. Then I became very worried and decided to sell all our managed accounts. In addition, I have sold some of our holdings in taxable accounts and some of my employee stock options that expire in late 2012.
Yesterday's 75 point advance in the Dow caused me to have second thoughts, but today's 172 point drop in the Dow gave me more confidence that I had made the right decision. Reducing our stock investments to reduce short term risk has been a good decision.
Currently, I plan to get back in when the market drops at least 10% (below 11,500). At that point, I will reinvest 10-20% of our account and will continue to do so for every additional 10% drop in the market. In addition, I will start looking for stocks to short.
Best of all, I am less worried and will sleep better at night. For now :-)
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This is not financial advice. Please consult a professional advisor.
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