Correction Needed?

Investors were shocked after today's 140 point retreat of the Dow Jones industrial average. Following today's pullback, many investors are starting to wonder if the real pullback has finally begun.

Over the past month stocks have been in full rally mode. The Dow Jones Industrial Average (DJIA) has surged to an all-time high and a strong earnings season has propelled most stocks and mutual funds out of this orbit. But was all of the good news we received as of late all it was cracked up to be? Or where investors really caught in a hoax that slightly mirrored the late 1990 tech bubble?

Consumer spending is down and the retail markets are in shambles. Our deficit is the highest its ever been. We are in the middle of a three year war with no exit strategy. The housing bubble is on the brink of disaster. There is a question mark surrounding politics with our ally to the East. A deficit could be looming. All of these thoughts bring up one question you might want to start considering...should you be investing?

Now I'm not saying the end of the US Financial markets is near or that you need to pull everything out of the market right now! My financial background can assure you that I am a true proponent of long term investing and the buy and hold strategy. Therefore, if you are currently investing in a 401k or an Individual Retirement Account and are years away from retirement, you might as well skip the rest of this piece and check out some of the other great articles we have to offer. However, if you are playing around in the stock market or are a short-term trader who is thinking about using your assets in a year or less, you might want to listen up.

Historically the summer stock market months are ones you want to stay away from. Why is this you ask? After raping you all year round on high commissions and every type of sales load you can imagine, your friendly neighborhood broker (no, not spiderman) is off vacationing with his family and counting your hard earned money. Therefore, you will usually see the stock market begin to trail off starting in May and restarting its engine towards the end of the calendar year. This year, there are plenty of analysts who seem to think otherwise. My thinking however is you might want to be overly cautious. Sure, nobody wants to miss out on the next Google or the next Microsoft, but if you need your hard earned cash in the next year or so you may want to reconsider. What are your thoughts if you lose 10% of your down payment on your families dream house, or lose 15% of little Johnny's college education? With short-term interest rates at 5% you can easily stash your hard earned cash away for some quick and easy money. Sure its not as exciting as hitting a four bagger, but its not nearly as risky either. If you are investing for the short term you may want to check out Vanguard's Prime Money Market Portfolio which is currently yielding 5.11%. That's not too shabby for doing absolutely nothing and knowing your money will be there when you need it next.

Remember in the stock market you don't want to be a chaser. The stock market is clearly built on emotions, and when everyone starts making easy money, you may want to reevaluate. People who play in the stock market usually end up getting burned. The funny thing is, the guy in the cubicle next to you will only tell you about the time he hit one out of the park.

Best of Luck,

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