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Q&A: When to be greedy and when to be fearful
A lot of my colleagues are moving their investments to certificates of deposit and cash accounts. Should I be doing the same?
A: Only If you need the money in the next two to four years. If the money is intended for a longer time horizon (i.e., 10 years or more), you have time on your side to weather the storm. The stock market is irrational and goes up and down all the time. While past performance should never be used to predict future market movement, over the long run stocks have historically provided a better return compared to bonds and cash. The important thing is to have a diversified portfolio. Warren Buffett said it best: "I will tell you how to become rich . . . Be fearful when others are greedy. Be greedy when others are fearful."
