If you are a smart long-term investor, do not pay any attention to short-term developments. They are often reported by people whose motivation may be to scare you (screaming about the subprime “crisis”)…
In the very long run, stock prices plus dividends (in the postwar period) have rewarded patient, long-term, careful accumulation of broad indexes, mutual funds, exchange-traded funds and variable annuities (with a careful eye on fees). They have not rewarded short-term trading…
The people on Wall Street do many questionable things. They reward themselves extremely well. But they have, in the last couple of decades, made it possible for almost anyone to get good results in stocks: buying very broad-based mutual funds, index funds, exchange-traded funds and (with an eye on fees) variable annuities and holding them for a long time.
I would like to keep as liquid as I prudently can, even if it often means selling stock at a loss…
People planning for retirement were told they could expect that their savings in broad indexes of common stocks would double roughly every 10 years. But we are now below where we were in 1998. If pre-retirees needed that doubling to get to their savings goals, they are now cut off at the knees…
I don’t know the answer. I just know that for a long time, we have paid Wall Street “experts” unimaginable sums for preparing for our retirement. They still have our money, and we have ashes. And I wonder whose side government is on, which is a bad thought to have, and I wish I didn’t have it. As the song goes, there is revolution in the air.
Ben Stein, soi-disant long-term investor, has thrown all his cherished principles out the window, and started selling stocks at a loss when they fall. Who should upper-middle-class investors blame? The government, of course, for being pro-market enough to let Lehman Brothers fail. And Wall Street "experts". Not Ben Stein, for telling them ad nauseam for years that almost anyone can get good results in stocks, just by buying and holding a broad-based basket.
Stein, of course, is the author of such sober tomes as "Yes, You Can Supercharge Your Portfolio!: Six Steps for Investing Success in the 21st Century" — which, it’s worth noting, was published this year, after events in the credit market in 2007 proved that its beloved Monte Carlo simulations are very bad at helping people dodge black-swan events which haven’t happened before.
But Stein doesn’t blame himself for buying into the bubble with his naive version of the Efficient Markets Hypothesis. Instead, he strongly implies that Wall Street has stolen Main Street’s investments, which is ridiculous — Wall Street has lost more money than anybody else in this crisis.
Incidentally, I’ve noticed quite a few people using "liquid" in the sense in which Stein uses it here, to basically mean "in cash". Stock-market investments are not illiquid: in fact, volumes are up, and, unlike bonds, it’s very easy to find a buyer for any stocks you own. Possibly too easy, for retail investors like Stein who are prone to panic.
Update: It gets better. Ben Stein actually wrote a book called "Yes, You Can Time the Market!". How’d that work out for you, Benjy?