Is it Time to Get Out of the Stock Market?

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There has been a lot of talk about the stock market lately. Make sure you drown out the noise while making sure to stick to your investment plan.

“Is it time to get out of the stock market?” This is a question I’ve heard a lot lately. It makes sense on many levels. We’ve seen the indices drop like a rock the past month. We’ve seen China go into financial convulsions. We’ve seen oil drop to ridiculous prices. This makes many wonder whether or not it’s time to get out of the stock market.

Let me answer that question with one simple word…No! It’s not time to get out of the stock market and hide your money under the mattress.

I know this is easier said than done. It’s difficult not to separate emotions from investing. That’s especially the case for those who saw their 401(k) balances plummet between late 2007 and 2009. You want to get out of the stock market now and stop the bleeding. I get that, though you’ll only do yourself more harm than good in the long run.

If you’re wondering whether or not it’s time to pull out of the stock market, consider some of the following ideas before doing so.

What Goes Up Must Come Down


This is a well-known axiom in the investing community. If life were all lollipops and puppies, the stock market would just continue to go up and up. Unfortunately, there is a little something called reality and a continued, unceasing trajectory is impossible. While I may dislike seeing investment losses as much as the next person it is vital to come to grips with the fact that you will lose money when investing in the stock market.

We can never truly know what exactly is going to happen in the market. Anyone who tells you otherwise should be ignored. What we do know, however, is fear is rampant. That’s what is leading a lot of the current market downturn – fear. Fear isn’t necessarily bad, per se, but when it leads you to make rash decisions it can have a significant negative impact.

Look at it this way. Your investments are going down. You think it’s time to get out of the stock market and you sell everything. What you’ve done is lock in your losses. Far too many did that back in 2008 or early 2009 and missed out on the resulting upswing that many others took advantage of.

The moral is not to jump in head first just because everyone else is acting out of fear. I am not an expert at speculating on the stock market, but I do know that what goes up must come down. I obviously don’t know what that amount will be, but it will come down. This is also not to mention the fact that I agree with Warren Buffett when he says that he’s greedy when others are fearful and fearful when others are greedy.

Who Should You Listen to?


If you follow the media you know the stock market, and getting out of it, is something that has been talked about a lot lately. Everybody seems to have an opinion on being in the stock market, and they will tell you exactly what to buy or sell. There is one simple reason why they do this – to get ratings. They have no idea what your exact situation is. They have no idea what your portfolio looks like. They simply need ratings as it’s their job to get you to watch.

While the noise can make it difficult for many to decide what to do when it comes to their investing strategy, I will say to be very careful of who you listen to when it comes to making an investment decision of your own. You are the only one who knows your specific situation and only you will care as much about your money as you do so make sure to your due diligence before listening to anyone. This is why I simply monitor all our investments through my free Personal Capital account. I’m able to stay on top of what they’re doing and if there are better, lower cost alternatives available. If you need a simple way to monitor all of your investments, you can do so with a free Personal Capital account.

Know How Being in the Stock Market Plays in Your Future


I have written before about having an investment plan and the current state of affairs in the stock market is one of the very reasons why I think it’s vital to have one. An investment plan helps you separate emotion from your investing and make a rational decision. That is key in times where the stock market it having palpitations. If you do deem it’s time to get out of the stock market, at least it’ll be because it’s based on a plan and not because you’re fearful.

With that in mind, you need to know the role investing in the stock market plays into your future. Are you saving for retirement? Are you saving for a down payment for your next house? Are you saving for a college fund? There may be many other reasons for your investing, though the point is you need to know the why so you can make your decisions accordingly. Some online brokerages will even offer tools to help you make these decisions on your own so you can make an educated decision.


There has been a lot of talk about the stock market lately. Make sure you drown out the noise while making sure to stick to your investment plan.

I find that times like this are a great time to reassess your investing. You should take a look at your overall portfolio and see if and when it might be time to rebalance it. In most instances you’ll find that nothing will need to be done, though it’s a good exercise to go through if you don’t actively watch your investments. Ultimately, when you’re asking yourself if it’s time to get out of the stock market you need to keep the long-term in mind. Whatever kind of situation you want in the long-run it likely won’t happen by acting out of fear.

Personally speaking, I take moments like the one we face now and let it roll off my back. We take a lazy approach to investing and are investing for the long run. It’s inevitable that we’ll see blips from time to time, but we’ll also see the market go up over time as well – that’s not something your mattress can promise.


What are your thoughts on the current state of the stock market? Are you making any changes in your portfolio, or are you staying the course?


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John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.

Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.

Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.

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  • Jon @ MoneySmartGuides says:

    Great post John! Investors need to have a long term plan and view when investing in the stock market and review that plan on a regular basis. You are going to lose money over the short term because stocks never just go up. But if you stick to your plan and ignore all of the doomsday scenarios, you will be OK. Case in point is 2008. Investors were crushed. But if you stuck to your long term plan and stayed invested, you would be ahead of the game now, just 5 years later. I know of too many people who after the market tanked sold everything and went to cash. They are still in cash and they still have hardly anything to show for it. While they think their money is “safe” as in they aren’t seeing their balance decline, they are taking a huge risk by letting inflation eat away at their savings.

    • John says:

      Thanks Jon! That is a great point about investors cashing out in 2008 only to fid themselves with very little now. I have spoken to way too man that are in that very situation and it’s saddening to see them lose out as a result.

  • Greg@ClubThrifty says:

    Nice post! Honestly, you can’t time the market. Although I believe that it will probably correct itself sometime soon, the fact is nobody knows what it is going to do. Over the years, the stock market has always gone up over the long term. Therefore, it is my belief that you should only be putting money in that you plan on having invested for at least 5 and probably 10 years. If you do that, you don’t have to worry about timing the market because time is your friend.

    • John says:

      Thanks Greg and I totally agree! I’ve seen way too many people try to time the market and just lose their shirts as a result. Having that long term view of things is vital, otherwise you’re just setting yourself up for heartache.

  • DC @ Young Adult Money says:

    This is one of those situations where your damned if you do, damned if you don’t. I think logically it makes sense that the market will drop or correct in the future, but what if it doesn’t and you miss out on gains? I know some people who pulled out of the market in the past but didn’t get back in time for the uptick. Long-term investing is the only way to go, unless you want to take on some significant risk.

    • John says:

      I don’t know that I’d say that you’re damned if you do or damned if you don’t, but I do agree that the long term approach is the best view to take. Too many people did pull out only to try and get back in now, only to lose out on a lot of gains.

  • Roger @ The Chicago Financial Planner says:

    Good post John. I am in the camp of not listening to the talking heads on CNBC and elsewhere and sticking with your financial plan. Rebalance your portfolio and invest for the long-term. The people who got hurt in ’08-’09 were those who baled out near the bottom and never got back in.

    • John says:

      Thanks Roger! I am in the same camp and is one that should be well thought out as opposed to jumping out of fear. I agree, those who baled are in poor spots due to missing out on those gains since 08-09.

  • pauline says:

    very few of us are smarter than the market and for a majority it is like flipping a coin. It is not an all time high if you factor inflation. And it historically rises some more. But you can get out and wait for a dip to come in again. With the risk the dip doesn’t come and you get in at a higher price.

    • John says:

      I agree Pauline, very few are smart enough to be able to outsmart the market and it always makes me cringe to watch investors make decisions to buy a certain stock after little to no research.

  • Johnny Moneyseed says:

    I totally agree that there are far too many “experts” out there voicing their opinion about this actually very serious topic. My mentality on the stock market is to keep pushing money in during the highs AND lows. I hardly ever look at the charts, and I never watch the news (I get my news from NPR) because of their inflationary nature.

    I would love a dip in the market so I could buy a little bit of stock on the cheap 🙂

    • Mr. 1500 says:

      Agreed! The “experts” are full of hot air.

      Warren Buffett beats almost all of them, but his strategy is boring to write about. Articles about why the Dow is going to hit 20,000 or why you should sell today get clicks and whip people into a frenzy.

      • John says:

        Great point Mr. 1500! No one likes the slow and steady approach, it’s no where near as “sexy” though it does generally get you much, much farther.

    • John says:

      I agree, there are way too many so called experts and you have to do what is best for your situation and make sure it’s done with some measured reason. We actually get a good bit of our news from NPR ourselves. My wife has loved them for years and has turned me on to them and tend to be fairly solid.

      I am with you on the dip, I have cash in all of our IRA’s for that very reason.

  • MMD @ IRA vs 401k Central says:

    Unless any of us can tell ahead of time what the market is going to do tomorrow, then today is perfectly fine day to invest. Sure you can read the metrics and look for signs. But countless universities and other professionals have tried to build computers and software programs that take all these variables into account and predict tomorrow’s outcome. And they’ve all been wrong. So really the best we can do is stop worrying about what will happen tomorrow and focus on getting our act together today.

    • John says:

      Great point MMD! Stop worrying is something that way too many people need to take to heart. I know it can be difficult to say no to, but that worry will generally just cause you trouble.

  • K.K. @ Living Debt Free Rocks! says:

    I also look towards the long term with my investing tactics. I still have quite a few years before I’ll need to dip into my investment funds. I did some research of my own and chose solid funds with low MER that have shown long term positive returns that align with my tolerance level. The rest is pretty much out of my control.

  • My Financial Independence Journey says:

    I invest regularly, regardless of how the market is performing. Every month when fresh capital hits my account, I try to find the most attractively valued stocks that fit into my investment plan and purchase them. Because I’m buying stocks that produce consistently rising dividend income, I can screen out all the noise about whether the market is too high or too low. I just look for value. All a higher market means is that there are less attractive options out there.

    • John says:

      That’s a great approach to take MFIJ and one that so few actually do. I find that that approach really helps take the emotion out of the investment decision and can make decisions much easier to come to.

  • Mr. 1500 says:

    “This is also not to mention the fact that I agree with Warren Buffett when he says that he’s greedy when others are fearful and fearful when others are greedy.”

    This is probably my favorite investing quote of all time. In 2009, the S&P 500 dropped all the way down to 666. I know people who freaked out and jumped out of the market. Fast forward to today where this index has more than doubled! Forget about timing and stay the course, as long as you’re in it for the long term.

    • John says:

      I would definitely say that Buffett’s quote is up there for me to and is one that I do my best to live by. I view it as the stocks I am looking at are on sale so why not buy some? The sad thing about so many of those people is that they never made it back into the market and missed out on so much in terms of gains.

  • Grayson @ Debt RoundUp says:

    Well put John. I have a pretty aggressive strategy in the stock market at this point. I have a 80/20 split between stocks and bonds. I know that what comes up must come down, but I am young enough to absorb those losses. If I was older, I would take a more proactive approach. I don’t think we will see what many media types are hyping as a massive fallout, but there will be losses. It happens all of the time. You can’t win without playing the game and you can’t win every game all of the time.

    • John says:

      Thanks Grayson. I am taking a similar approach myself and agree that if I were older I would be a little more conservative. I don’t think we’ll see the feared meltdown either, but will see some sort of a pullback.

  • Kim@Eyesonthedollar says:

    Since I’m not going to need my IRA money until I’m at least 59.5, that can stay in mostly stocks. Otherwise, it’s a great time to invest in rental properties! I also used to hate the old “If everyone was jumping off the bridge” saying, but I’m sure I’ll use it myself at some point. I think we all turn into our parents a little bit as we get older.

    • John says:

      Lol! I feel the same way Kim, it’s just a matter of time to certain extent. Rental properties are great, they bring greater diversification. 🙂

  • Nick @ says:

    I agree with a lot of the comments here. When you try to time your purchases to the market you end up getting burned more often than not. Slow and steady wins the race. 🙂

    • John says:

      Great point Nick…slow and steady does win the race. Unfortunately it’s not exciting enough for many people to practice.

  • Tony@WeOnlyDoThisOnce says:

    Great insight and great post. Feeling obviously will fluctuate with the market…

  • Kurt @ Money Counselor says:

    I think each person has to customize his or her own strategy based on a host of factors–age, income, retirement ambitions, savings, etc.–so I don’t recommend my strategy for anyone. But we are sellers. In my opinion stock investing has evolved into a far riskier proposition over the past 20 years, and we’re no longer comfortable with the risk. Two bubbles followed by two crashes since 2000, followed by another steep run-up (in progress)–my vertigo tells me to look elsewhere for investments more appropriate for our circumstances.

    • John says:

      That’s a great point Kurt and one the talking heads on CNBC don’t often mention. Your investing needs to be based off of all those factors in order to make them right for you. If it’s not personal, you’re only lining yourself up for more potential herd following.

  • Shannon Ryan @ The Heavy Purse says:

    Well said – “Understand that their job is to sensationalize to get ratings and that in general, they do not care about your retirement portfolio.” So many people run around chasing after what everyone else does or what the so-called experts say to do. The reality is everyone’s situation is unique. They have their own personal goals, risk tolerance, etc. For some, it’s absolutely the right time to pull back and for others full steam ahead. I know you’ve talked about this before John, but you also have to remove emotions from investing. It’s easy to get caught up in either fear or exhilaration when investing but neither help you reach your goals. Knowing what you want your money to do for you (when will you retire? What will you do in retirement? Buy a home, pay for kids colleges, etc), and following a well-though out plan and investment strategy is what will help you achieve your goals.

    • John says:

      Thanks Shannon & thanks for your insight! I agree that each investor has their own unique situation and need base their decisions off of that as opposed to what the pundits suggest you do. Thank you as well for reminding us about the emotion, you’re exactly right, those do have to be removed in order to help you reach those goals. Having a plan is great, I have one and suggest it for many, but will do you no good if it’s disregarded in exchange to follow emotions.

  • Lance at Money Life and More says:

    I dollar cost average so the ups and Downs will balance out in the long run for a hopefully steady increase!

  • Edward Antrobus says:

    Personally, I don’t pay too much attention to it at all. I do check in on my portfolio every couple weeks, but at the end of the day, I’m mostly just concerned about what it is going to look like in 40 years.

  • The First Million is the Hardest says:

    I’m staying the course. I came up with an asset allocation that’s for good as well as bad markets. If I knew exactly what the market was going to do at any given point in time, I’d probably be living on my own private island by now.

    • John says:

      Sounds like me, we’re staying the course for the most part as well. Jumping just out of fear will get you nowhere in the end.

  • Gen Y Finance Journey says:

    I just read an article today warning of a 90% stock market correction. I try to tune it out, otherwise I’d drive myself crazy with all the anxiety.

    • John says:

      Wow, 90%, I guess I need to pull out and sock my money away under our mattress. 😉 I like to tune it out as well, otherwise it’s just unnecessary noise.

  • Justin@TheFrugalPath says:

    I wouldn’t mind a nice correction in the near future. We’re planning on focusing on our retirement after the debt is gone later this year. A good dip in the market would allow us to invest at lower rates. Timing the market is a waste of time. You usually end up having the opposite effect that you intended. Plus ups and downs are going to happen and since my horizon is so long it doesn’t have much impact on me.

    • John says:

      I agree trying to time the market is simply a fool’s errand at the end of the day. A pullback, to some extent, would be nice and one that would be good to take advantage of. We keep certain percentage back in our IRA’s for that very reason so we don’t have to wait if we want to move fast.

  • KK @ Student Debt Survivor says:

    We’re doing everything exactly the same as we always do. I’m not planning to retire for another 30 years (probably 40), so what the market is doing now doesn’t panic me one way or another. If it goes down I can buy a little more for the money, if it goes up I can buy a little less.

    • John says:

      Sounds like exactly what we’re doing. Those ebbs and flows are to be expected and is just a part of investing in my opinion.

  • Paul @ The Frugal Toad says:

    Not sure what happened to my earlier comment but I’ll sum it up in a few words. I don’t try to time the market. When I did, I lost money. Those that got scared by the crash of 2008 and pulled out of the market missed one of the biggest comebacks in market history. The market fully recovered in about 2 years so if you missed just part of that, you never recovered your losses. I use dollar cost averaging so I buy more shares when the markets are down and less shares when price are higher. Rebalancing quarterly helps to keep sector risk balanced. Of course if you are less than 5 years to retirement you should be moving towards a more conservative mix.

    • John says:

      That’s a great point Paul. I have spoken to too many people who’re in that same situation and missed out on too much in terms of gains. I agree that if you’re inching closer to retirement you should likely be moving your portfolio much closer to a more conservative mix.

  • Jim says:

    John, great post, and yes I have made some changes to my portfolio. I had 3 bond funds that have done pretty well, paid a nice dividend. I got out of those and going to put that money into a self-directed IRA to buy cattle. Got a friend who is a cattle broker, has been for 18 years, I am going to by 40 head of cattle with calf in May and sell the calf in Sept/Oct. Hope for a 10-12% ROI, will keep ya posted.

    • John says:

      Thanks Jim! I’ve never heard of being able to invest in cattle within an IRA, who do you have to go through in order to do that? That said, great way to get some good diversification.

  • Canadianbudgetbinder says:

    I’m still learning about investing and certainly am far from investing on my own and buying stocks but maybe one day. Everyone has to start somewhere I guess. I know that when we invest our money it will be long term and I also know that with investments comes risk and I’m ok with that. I think we may start saving up to invest in the real estate side maybe buy some investment properties for long term.

    • John says:

      Sounds like a good plan Mr. CBB! If we had more time I’d look at real estate as well, but just is not in the cards for us right now.

  • The College Investor says:

    I’m not making any changes, but I’m also not adding any more. Right now, I’m holding cash instead of adding to my existing investments. I’ll get in when the market pulls back next.

    • John says:

      We’re not making any changes either, save for some possible rebalancing that I need to look at. We have a good chunk of cash in our IRA’s as well to use when/if there’s a pullback.

  • Jose says:

    John, Good post and a topic that’s been on my mind these last few months. I’ve had several posts on the run (Running with bulls or lemmings) and one on the stop loss, which I think is one of the most important tools to be using right now to protect your gains. My strategy? I’ve taken some money off the table and am using ever narrowing trailing stops to protect gains in parts of my portfolio.

    • John says:

      Thanks Jose! It’s been on my mind as well and one that’s important to think rightly about as opposed to following the herd mentality views being communicated everywhere. We’re staying the course by looking at possible rebalancing and keeping our stop losses in play.

  • cashrebel says:

    Great analysis! I am trying to be more cautious as everyone else gets giddy. Im still dollar cost averaging except im changing my stock /bond purchase allocation from 90/10 to 60/40. I think its always good to do the opposite of conventional wisdoms but still invest a healthy percent in equities no matter what. We’ll see.

    • John says:

      Thanks CR! Being cautious while everyone is ecstatic is a great way to go in my opinion. We’re pretty much staying the course and looking at possible rebalancing opportunities.

  • Jerry says:

    Great point about what goes up must come down. There are always too many bulls offering advice when the market is flush. Even the great financial guru Mila Kunis is touting stocks right now. Lover her in The 70s Show, but not as a source of financial wisdom. Hopefully, when the market corrects, it will not drop so much that people lose their original investment amounts.

    • John says:

      Lol at Mila Kunis! I saw a headline about that the other day and it was just too stupid for me to read. I agree, hopefully the market will not contract too much as investors have been through an awful lot in the last five years.

  • Ian says:

    If I was to do anything it would be to maybe review your portfolio allocation a little more frequently and re-balance accordingly. Obviously depending on your acceptable risk levels and age, market changes might mean more to you in the short term. I am curious about how a market that seems to be reactionary to the global economy compares in volatility to earlier eras that maybe were not as globally connected or reacted slower.

    • John says:

      You’re right on Ian. I’ll be checking our allocation to see if there is any rebalancing needed, but nothing really beyond that. You bring up a great point about the reactionary nature of the market. I would probably say that it was not as bad decades ago as news is instant today and reaction falls in kind. Then again, I could be completely wrong in that. 😉

  • Brian @ Luke1428 says:

    Nice post John! We are not changing anything right now with our investments. I’ve always gotten into trouble in the past when I tried to time market, especially the ups. (I think the downs are a little easier to diagnose though.) We follow a simple plan of continuing to invest through the ups and downs mostly because our time horizon is so far out.

  • Chad | The Stock Market and I says:

    The market has been absolutely amazing this year. It has weathered all of the government dysfunction from the fiscal cliff to sequestration to shut down. We still go higher. There is no rationale to the market. It is completely psychologically driven. Right now everyone is a cheerleader, but hold on when the music stops

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