General Question

Dorkgirl's avatar

Would it be wise to invest in FannieMae or FreddieMac while the stock is down?

Asked by Dorkgirl (1496points) July 15th, 2008

I’m thinking of putting some money into one or both of these while the stock is so low, but am also a little afraid of what might happen over the next few days. Does anyone have an opinion on how “smart” this investment might be?

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6 Answers

gailcalled's avatar

Dumb and Dumber until things resolve themselves. A CD or Moneymarket fund is a good place to park cash until the price of oil, job market, employment, etc resolves itself.

shilolo's avatar

This is a good question, but as a small investor (I assume) you are probably wise to stay away. There is a reason why the price is the way it is. If it was such a great value, then large institutional investors would have snapped up these stocks at bargain basement prices and thus driven up the price. The fact that the market only wants to sell could be irrational behavior, but could also be that people with greater knowledge are aware of deeper problems. The New York Times’ economist Paul Krugman just had an opinion piece on this (tangentially).

cheebdragon's avatar

How much do you love losing your $$$?

shilolo's avatar

@Gail. In the short term, you might be right about “safety first”, but studies have shown that in the long term, people tend to buy high and sell low (like now). The best course of action is to take a deep breath and continue buying diverse equities or mutual funds. This dollar cost averaging approach takes away the emotional aspect and protects you from dips in the market. Of course, how aggressive you want to be depends on a lot of factors, but I favor continuous investment over trying to time the market.

marinelife's avatar

I’m not sure anyone knows. In a time when people are causing enough ruckus at a failed bank that the police have to be called, it is probably not the time to take that much chance with your nest egg.

Sueanne_Tremendous's avatar

Shilolo’s got the right idea in my book. Now is a great time to do dollar cost averaging. Simply figure out how much you want to invest in the next 6 or 12 months and divide that number by 6 or 12. Invest that amount each month like clock work. Pick a stock, or better yet an index fund. See this link to learn how to invest your money without paying broker fees through DRP’s (DRIP Funds) or check out my old pal suze orman. She is a financial wizard and is highly adept at helping new investors. Good luck!

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