What is wrong with the S&P 500?

Question

Why is the S&P 500 countiueing to drop. I invested money in it last month in the VFINX fund and it continues to go down. Do you think it will go back up anytime soon? Should I just cut my losses $1500 :(. Thank you for your help

Answer 1

Recent history tells us that we should get a bounce (increase) next week, and then another decline. This decline might be the last one. But hey, I'm just looking in the rearview mirror; and I could be all wet.

I wouldn't sell anything at this price, but you could consider selling half if we get a bounce. Or, the odds are very high that your fund will have gains by the end of the year and you can just wait it out.

One lesson you can learn from this is to never invest a large sum of cash all at once. You never know when the market will top out. Another rule for the very patient investor is to wait for a panic in the market before investing any money. We usually get one or two per year.

Yet another tip: If your fund has a sizable decline, add more to your investment. Buy on dips. This tip requires that you always have some investable cash on hand waiting for the declines to happen.

I also have a large position in the S&P500 although most of the investment was made some years ago. I am slightly concerned about this index for two reasons. It is heavily weighted with integrated oil companies and financial companies.

Oil is worrisome because I think that sector got overbought & many of those "hot money" speculators think it has topped out & so they are selling now. Many think that oil prices could decline substantially in the next 6 months.

Another reason is that the latest quarterly reports show declines in the amount of oil production. Oil Co's have not invested enough in their future supply of oil. But this is not news to most sharp investors. So it sounds like it could be fear & panic to me.

Financial companies will suffer some losses with bad mortgages and bad credit, though I don't think the amounts will be large for most of them. The bigger problem perhaps is that this cloud could hang over financials for a year or two.

Conceivably poor financial performance could depress the S&P and Dow for some time. It is possible that the Nasdaq100 will outperform for the next year or two.

Answer 2

Before the drop, it and the Dow Jones industrials were doing pretty good, right? Last Thursday over 3 thousand stocks on the NYSE were down, with similar numbers on the Nasdaq and Amex. It wasn't just your S&P, if you've noticed. Hang on, you've probably already suffered the worst of it, even if it is a bear market. Between the Dow Industrials and the S&P500, an enormous amount of stock interest is practically glaring at these stocks. If you think things were bad with these, many others (obviously not all) did worse. Then too, remember, it is a basket of stocks, some were up, several were down, but they are picked for inclusion on several dozen more criteria than you likely used to select them. Remember your word, investing is a long-term thing. Trading is something else, and you already missed the window of opportunity to bail out Thursday, so again, hang in there.

Answer 3

This is a complex question that even history cannot always explain. However, historically, the Dow has corrected itself cyclicly every 5-7 years. The last correction was 2001, the most sever correction since 1929. It would seem that this is just a normal part of the business cycle. Hold on, and if you have a bit of cash, do some bargain shopping.

Answer 4

I believe you should hang in there. The way to invest in mutual funds is to sit back and be patient. A 500 index fund will outperform most managed funds and Vanguard's costs are very low, so I believe you have made a good choice. It's best to just wait. This is not a good time to sell. The market is already oversold. It's too extreme. It should come back, although it might take all summer...or longer.

Answer 5

my initial guess is that you dont have enough ram. Without knowing the actual error, 512mb seems on the low side for a dual core processor. Lots of HD swapping. also did you install anything recently that caused the problem? Back track everything before the problem and see if you can work it backwards. The computer should be able to boot to the last known good profile. I suggest posting another question with the actual error if you get no responses that help here... good luck

Answer 6

A good question but I do not have the answer precisely. The drop has indeed been sever. There should be a bounce next week as the bargain hunters materialize. But will the drop continue? Maybe. There is that possibility. And I would not discount it in the least. If you have the intestinal fortitude, you can just hang in there. The ride may be rough, but eventually you will recover and prosper, hopefully.

Answer 7

It could do anything between now and when Bush leaves office, and it will probably go up after that because oil will probably go down and the Iraq war will come to a end and I believe all boats will rise at that time but for now look for a very unsettled market.

Answer 8

Nothing wrong with the S&P - it's correcting. There is only one thing to do - correct your mistake before you lose more money. You never know how far these things will go. No need to sit and watch your $$ shrink. There will be another party you can re-join in less than 5 min.

Answer 9

if it does not come back sooner or later, then you are in more trouble then losing $1500, it means that the entire american economy has colapsed and we are in the crapper.