Fear and Greed

Well I’m a bit torn now.  We are now seeing a rather dramatic drop in stock prices which is making me think my current plan to just pay down my line of credit for the end of the year might go out the window.   While everyone is in complete fear mode the bottom has dropped out on prices and I’m thinking about borrowing some additional funds to invest up to my limit of 10% of my investment net worth.

The current drop is vaguely reminding me of the slump from the peak in 2000 of 11, 389  for the TSX back in 2000 and the drop down to 5, 695 by the end of 2002.  Fear and an exploding bubble can do amazing things for those who can pick up on the deals.

I’m also aware that things might be worse before getting better.  So do I sit on the side lines or do I just move the money and start putting in a few low limit orders.  If I get a huge deal so be it, if not then I accept the fact and hope for further down turns.

Ah, so many choices in life.  The good news is regardless if I do spend the borrowed cash I can easily float the interest on the money.  Meanwhile fear and greed are hitting each other in my head deciding who is going to win this one.

So is anyone else buying?  If so what have you picked up? Or do you think it will all get worse before getting better?

9 thoughts on “Fear and Greed”

  1. I had scaled back my RRSPs earlier in the year in favor of paying down debt, but like you I’m thinking of shifting back to paying the minimum interest payments on my debt and maxing my RRSPs again.

    I’m also planning on starting TSFAs on Jan 2nd ’09 to start capitalizing on tax free growth, as well as a low market.

    The question is, do I borrow even more for investment in non-registered funds. I’ve been contemplated borrowing something like $100k for investment purposes, but not sure I’m ready to take on that kind of leverage. Although the deductible interest payments are appealing to me given the current tax bracket I’m in.

    I think it’s a great time to be investing now, since market situations like this only come around every 15-20 years, and I’ve got a lot longer than that before retirement.

  2. I’ve been seriously considering a chunk of the LOC to do the same.

    I do have a 25 yr time frame and the LOC could be paid off in less than a year.

    However, Dollar Cost Averaging is likely a more prudent approach

  3. That’s true, via DCA you’re definitely not going to get fleeced. But a one-time injection of a lot of money could go either way. Although buy low and hold long is a good strategy in my opinion! 🙂

  4. I have been buying a lot of index funds recently. Every month, I check if any of my investments is down down than 10%. If that’s the case, I buy more of the funds, trying to bring it back to the proper allocation.

    The timing of this crisis is fortunate for me, as my debts are now paid off and I have some extra money to catch up on my RRSP.

  5. Don’t feel bad for not being able to pick the bottom. My philosophy is to buy when we get these dramatic sell offs like we had yesterday. Nobody knows where the bottom is but some of these valuations are so compelling that it would be a shame to miss the deals. I’ll be buying all the way down and some of the way back up likely. I’m already into Line of Credit money.

  6. I’m buying more company stock. I’m confident in my company and besides that I get an automatic 15% return through the employee purchase program. Plus if I buy it while it’s low I get locked in at that price for 2 years! This is not stock to hold on to til retirement but to sell right away to get the 15% and any short-term gains 🙂

  7. I have some HXD.TO, an exchange traded index fund that shorts the TSX Comp. Its been doing good lately. I think there is a high probability that this Bear Market will continue lower. I will not be surprised to eventually see a low of 6,000 or less. The TSX Index may be correcting the entire run up from prior to 1972.

    I have to admit I do have one long position, a $1,000 investment in TD Energy Fund that has dropped to near $600. Not sure if I can explain that one today. Guess I will be holding those units for a few years.

    In any event, we can count on the index eventually returning to and surpassing the peak of 15,155 one day. Only the timing is in doubt. It could happen fast or slow.

  8. Ok for the record I only sort of pulled the trigger. I bought one small position on my LOC money.

    I still want my LOC at $0 when I go shopping for interest rates next July. So I decided to keep things small at this point.

    The rest I’ll just dollar average all the way down on my RRSP’s.

    Thanks for the feedback everyone!

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