Eric Schurenberg: The one question on everyone's mind is when does this end. When is the stock market going to turn around. Now in early March it looked like the rebound might be now. The market has risen drastically, very quickly. With me today to discuss this is Jill Schlesinger, editor at large of money watch.com. Hello, Jill. Jill Schlesinger: Hi. Eric Schurenberg: All right, how do we know that this is a real rally and not a bear market trap. Jill Schlesinger: Well, the problem is we won't know till more time elapses, and then you -- all the time will have elapsed, and you would have either gotten in at the wrong time or the right time. But it will not be confirmed until time elapses. This is actually a very normal feature of a bear market. Violent up swings within a general downward trend. Saw it, actually, in the '30s, 1929 to 1930 the market was up almost 50% before falling again by 80%. So these can be traps. We have to be very careful about not getting too excited about every 20% rally. Eric Schurenberg: Well then, is the right thing to do to wait until the market pulls back to put some of that cash that's been sitting on the sideline to work. Jill Schlesinger: Well, if only we knew when that moment was. And that's the problem. That's really one of the biggest problems about pulling out of the market. You actually have to make two perfect decisions. You have to know when to get out, but you also have to know when to get back in, and no one is that smart. So as investors, what we are forced to do is say hey, I'm not going to be smart enough to do that, so I will be continually investing, adding at these levels that are lower rather than trying to guess where the bottom or the top is. Eric Schurenberg: How can it be a bottom. Let's say it is, let's say we're lucky and it is. How can it be a bottom when the economy is still in such terrible shape? Jill Schlesinger: It's a very interesting and confounding fact that the stock market looks forward. So perhaps the economic data that looks backwards will still be pretty rotten for the next six months, but maybe the market is going to look ahead and say look at all the stimulus that's coming, look at what the Federal Reserve is doing, looks what happening internationally. All of these policy actions will have a positive effect on the economy. We will come out of it, let's buy stocks. That's why the stock market goes up. However, if investors are wrong, we're going to see a retreat right back to those levels that we saw in March and in November. Eric Schurenberg: Investing correctly means doing the thing that is the hardest. Putting money in when the market is down, pulling it out when it gets overvalued. How do you talk yourself into the doing the right thing. Jill Schlesinger: I think the best way to do it to not try to make a huge decision one way or the other. So what you say to yourself is okay, how much time do I have. Do I have ten years? Okay. If I've got ten years then I can afford to take my lumps along the way. And frankly, Eric, if you look back you say in October of 2007 I was putting money into my 401K plan when the market was 50% higher. Now emotionally, you felt good. The market was rising. But actually, you're better off today, because you're buying assets at a 50% discount. So if you can drill some of those basics into your head, I have time, I have a diversified portfolio, and I'm not going try to out-guess the market. I'm going to be a consistent investor. You'll be a happier investor as well. Eric Schurenberg: Makes sense, Jill. Doesn't sound that easy. Simple, but not easy. Jill Schlesinger: It never is. It never is. And this is going to be a challenge as an investor for your whole life. It's simple, but it is not easy. Eric Schurenberg: All right. Jill, thank you very much. Jill Schlesinger: Thank you. Eric Schurenberg: I'm Eric Schurenberg for Moneywatch.com. Thanks for watching.
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