For any financial gurus out there -- I have a question...

[FourScore]

My mother is quite elderly. She is spooked by the debt ceiling crisis and is contemplating taking all of her investments out of the stock market. She is afraid that if things go south, she will not live long enough to recoop the losses. She says if the Republicans really do let this country default on it's loans, then she'll be glad she did it. If not, then she'll just put the money back in. This has my husband thinking maybe we should do the same. Any thoughts?

[JustAnotherGen]

1. How old is she?

Does she have a standard operating procedure savings account?

I've not sold anything . . . Not one thing - but my 401K and Roth are pretty conservative.

What I have been doing this past few weeks? Buying a lot of Green/Renewable Energy and Mobile Application (think apps that support Medical purposes on hand helds and tablets that assist with the computerization of all medical records) penny stocks. But I'm 38 - and can let a a lot of these run the marathon.


I think it's key to know how old your mother is, and how aggresive her stock portfolio is.

[safeinOhio]

3. tell her to not sell more than half, as

it's 50,50 right now on what will happen.

Simple rule to making money is to buy low and sell high. Best way to do that is to sell when everyone is buying and buy when they are selling.

[izquierdista]

2. Look at the risk vs. reward

The market is up a lot since the March 2009 low, so that is the downside risk in case of some nasty news. The upside reward is that it might rise another 15% to test the all time high of October 2008. Any drop would be precipitous, and any gains would be long slow slogging. I think Mom has a pretty valid view.

[handmade34]

4. interesting....

I just went to visit my father (83yo) yesterday and he insisted on talking finances... he already has taken his money out and put it in his credit union...

He expressed fear of not getting his SS checks and said he is still is a Democrat all the way... I wanted to give him a BIG hug!!

[reformist2]

5. If she's elderly, she really shouldn't have much in the stock market.

I'm not an expert, much less a "guru", but I think it's generally agreed upon that older folks should have most of their money in cash and/or bonds.

[joeglow3]

6. Agreed, but this is an interesting time

If the above scenario plays out, bonds will get their asses hand to them as well, as this would inevitably lead to an increase in interest rates and the value of bonds would also drop. This is why you see gold and oil shooting up (for the record, I do NOT recommend buying gold).

[elleng]

10. Disagree.

My Dad is 97, has SocSec + a good amount of investments w a good advisor, who's done well for him for years. Enables him to pay 'rent' at assisted living, and to provide for us 'kids,' 66 + 61, when in 'need!'

Obviously no telling what would happen w default, market's been doing pretty well lately in fact. I listen to PBS' Nightly Business Report every day for general info.

I'd NOT suggest anyone take everything out of market, if their vehicles have been sound for some time. jmho

edit: Bottom is not going to fall out of everything, immediately, if 'default,' except for bonds.

[edhopper]

15. +1

[NeedleCast]

16. This is correct

At this point most of her retirement portfolio should be in safe(r) waters. I still think an 11th hour agreement will be made. Everything going on right now is simply a dance...just like it was a few months ago on the budget.

[cally]

19. Yes. When you don't have time to recoup any losses in the stock

market, then you should move to other investments. She shouldn't be in the stock market now imo.

[MilesColtrane]

20. +1

This is the correct answer.

Equities are volatile. Her exposure should be limited to no more than 15-20% of her total portfolio.

[masmdu]

7. Why not place stop loss orders on all the stock holdings at some percentage below their current ...

value. Say 5% for example or whatever she may be comfortable giving up for the "insurance" of having Sell Stops in place.

Then if these stops are triggered by the Debt Limit situation effecting the stock market she will lose 5%. If the Dept Limit situation is resolved it is unlikely the stops would be hit.

If the Debt Limit situation actually does lead to the stock market having a negative reaction and she is stopped out she could then reenter her holdings at a lower price. Or, she could then estblish BUY stops to repurchase her holding at the SAME price at which they may have sold for.

This would allow her to buy back in and be where she was prior to any stock market event if and when it recovers. If it doesn't recover then she is out 5% of her holding (the cost of insurance).

This is, of course, just a possible stategy. Please also consider tax consequences which would also play in to the cost of this approach.

Good luck!

[masmdu]

8. BTW, Any stops should not be placed too close to the current price to avoid being stopped out during

normal market fluctuations. I would be thinking 5% or larger.

Addmittedly, never good to have to take a loss but it would do the trick.

[Ganja Ninja]

9. Stocks will take a big hit if they don't pass the debt ceiling.

But if they do it's probably going to take off at least for the short term. I'd bet against them not raising the debt ceiling and leave it. The GOP knows what the bankers want and they won't let them down.

[elleng]

12. Right

[elleng]

11. Reposting this directly for you, from #10.

My Dad is 97, has SocSec + a good amount of investments w a good advisor, who's done well for him for years. Enables him to pay 'rent' at assisted living, and to provide for us 'kids,' 66 + 61, when in 'need!'

Obviously no telling what would happen w default, market's been doing pretty well lately in fact. I listen to PBS' Nightly Business Report every day for general info.

I'd NOT suggest anyone take everything out of market, if their vehicles have been sound for some time. jmho

edit: Bottom is not going to fall out of everything, immediately, if 'default,' except for bonds.

[JustAnotherGen]

13. Coming back to say

Depending on YOUR ages - I probably wouldn't get rid of anything.

Example - I inherited a large amount of Xerox stock when my Uncle Doug died (he was the exec that brought total quality to them - kind of a noted member of their leadership in the 80's and 90's). I still have Kodak stock my mom's parents bought my brother and me, as well as Corning, Ultralife and Paetech (I worked for Allworx before they were bought out by Paetech). The Corning and Ultralife were transferred to my brother and me from my dad when he left those companies . .. they were 'hiring bonus stock'.

I'm holding all of that - but I'm 38.

Where I AM buying the past few weeks is the pennystock in Energy (Renewable/Green) and Mobile Apps. I'm dumping some to get better 'marathon bets'). If you and your husband are in your 50's? I'd proceed with caution.

Have you guys reviewed your level of high risk? I intend to not have ANY high risk investments at the age of 50. But I also have an auto immune disease which will probably lead to me not being able to work in 12 years. So I have to be as aggresive as I can in the penny stock arena.


Good luck whatever you decide!

[Dappleganger]

14. We put my elderly father's money into an annuity...

It makes sense in his particular situation.

[taught_me_patience]

17. The debt ceiling will pass, she shouldn't worry about it.

I know some guy who are managing huge bond funds that have absolutely no fear at all of it not passing.

The real questions is why your elderly mother is invested heavily in equities in the first place. She should be mostly in bonds.

[SteveG]

18. By the end of the Day I will

have moved my 403b into cash and bonds. I will be completely out of the stock market for the next month. I am too old to risk taking the losses again that I took in 2008 (and have just recovered from). I am convinced that the Tea Bag faction of the Republican party is hell bent on committing national suicide, and nothing that saner minds do or say, will allow the House to raise the debt ceiling.