Long Term Investors - What Now With Your Portfolio?

Here we are back at nearly the same level as we started the year. Certainly not without our share of ups and downs. Japanese earthquakes rocked the markets in April, budget malaise persisted through the mid year and of course, who could forget the European situation.

So what is your broker or investment advisor telling you now?  Pile in now and do not miss the next move up?  Or take some chips off the table after a decade of unprecedented market volatility and little or no absolute return on your portfolio?  Wish I had a crystal ball and I could give you the correct answer.  But since mine is broken, my words of advice to long term investors is, LOCK IN WHAT YOU HAVE HERE. Whether it be selling calls or buying puts on the overall market, or simply putting in stops on your portfolio (which you may get roasted on, on the overnight moves).  JUST DO SOMETHING.  Do not sit here idle and then start complaining if we go back to the bottom of the recent trading range.  At the very least, if you have the stomach to enter new positions in the market, do so with some downside protection.

Surely the perma-bulls, can argue earnings are great, as well as umemployment is coming down (which it is really not, people are just giving up looking for jobs), and Dow 15,000 is just around the corner. To you I would say things always look great at the tops and horrible at the bottoms. Whether the market bottomed in August and is gearing up for the next leg up is not the question.

The question is, how can you participate on the upside (your total return minus the cost of protection) while not exposing yourself to unlimited downside risk. At this time, the market rally has been fueled by the anticipation of the European monetary crisis being solved. Will it ever be solved, or are the measures attempting to be taken now only a temporary solution to a much bigger problem? Until we allow countires and financial institutions that should fail to actually fail, how much confidence should we have in the markets?

But do not rely on my advice, consult your broker or financial advisor and make sure they have a well devised plan to preserve what you have now, and still participate on the upside.  If they don't have that plan, consider changing your broker.