We must continue to believe in our economy, in our recovery, and in dollar-cost-averaging.

You have to consider your tax bracket now and potentially then.

If you are in a high bracket say 28% and this kicks you up to 33% is it really worth it?

I move my money out of there and into my online savings as often as I can, even if the interest rate is way down from before.

Your right in the managed futures. They are a high cost investment and are not right for every person. Nowadays, you can purchase open-end mutual funds as well as the commodity ETF to get some exposure. I’ve been using them as a portion of certain client’s portfolios (5-10% max) for the past several years. I didn’t just jump on the bandwagon. In 2006 and 2007 (more so 2007), clients were wondering why we were in these. 2006 we were up, 2007 futures were down about 4%. My sole reasoning was diversification, not chasing returns. 2008 is another story. We were up over 20% in that portion of our portfolios. (That was the only thing that made money). In meeting with new clients, I never use “return” as a reason for any investment choice. Chasing returns will get you burned as investor (as you stated) and selling them will get you fried as an advisor.

Those funds typically have high fees, usually above 2%, some as high as 8%. Since futures trading is a zero-sum game, once you introduce fees, it’s now negative sum. Long term, odds are greater that you will lose more than you can gain.

The last time managed futures funds were the hot thing was during the last bear market, but eventually luck ran out, many faced huge draw downs, and many went under.

They’re an easy sell based on past performance in a down market, but a lot of the people that made money at the end of the day were the brokers that sold them. Many of these funds pay brokers commissions that are significantly higher than other products. That should be a red flag when a fund feels the need to pay higher than average commissions in order to compete in the marketplace.

I also suspect that many of the people selling these in a retail setting do not actually understand them. Too often, I see people’s money placed with more than one manager that are actually betting against each other. They are essentially paying management fees to both bet on red and black at the same time, a wash.

I’ll admit I’m not a fan of these products (obviously), but the last thing people should be doing right now is chasing past performance.

This is definitely solid advice, though. We won’t pull out of the current slump until people start investing again, and this is an important part of that process.

For instance a 40 year old with 25K in their 401K. Maybe 25% tax bracket.

I think we’ve all studied history and I could inundate you with facts and figures that show the recent market drop does rank as “one of the worst”. Now keep in mind that I am forever the “Bull” and believe the market will come around.

Besides, it wasn’t a statement, it was a question hence the “?” at the end of the sentence. Even if it was a statement, I hardly see it as “irresponsible”. With the market being down 50% from it’s 2007 high, I’m fairly certain that this is up there with the worst of them. But maybe with your studies, you can enlighten us differently?

No, because I have studied history. We’d all be a lot less panicked if everyone stopped telling us how terrible everything is. This is not even close to being “one of the worst” financial downturns “ever.” Please stop making irresponsible statements.

The last time I ran some numbers for somebody was the middle of 2007 (including transaction costs, taxes, etc) when the market was still respectable. The person was in their late 20’s and a decently high tax bracket, and after about 20 years is when we saw the advantage of the Roth conversion. It’s hard to run general numbers because there are too many factors at play (tax bracket, time horizon, investment selection, etc.).

The only thing that I can conclude is that with accounts being down as much as they are, the tax bill is obviously much smaller. With all my write off’s from starting my new business, I was able to convert my rollover IRA to a Roth this year. I thought about waiting until 2010, but my optimistic outlook was that my funds would have grown by then and I would be forced to pay more (albeit over the course of two years). So with the lower tax bill, my gut is telling me that the break even would be much shorter for me and anybody else that has time on their side. A 50 year old converting to a Roth has more to consider than I did when I converted.

To all the readers, do not give up hope on the stock market. Prices are down because so many people have given up on it already. There will be a recovery, patience my friends.