The question is: how much does capping those profits cost and is the investor willing to pay that amount?

-allow bank rep to advise you and spouse to hold in your rrsps high-MER, low-return mutual funds to pad his commissions
-ignore nagging feeling throughout 2007 that you should reduce proportion of investments in equities – instead listen to bank rep about wisdom of buy-and-hold
-watch market in fall 2008; kick yourself repeatedly
-start reading about investing (e.g. canadiancapitalist!)
-decide to shift rrsps to TD efunds – attempt this in late jan, 2009, watch bank rep wait to sell investments until early March
-watch money sit in aether between BMO and TD until early May, while TSX climbs 30% from when you liquidated
-bang head against desk; repeat

Seriously, don’t do this. It really hurts, and I’m not talking about the head bruises. The worst part is that I wasn’t trying to time the market – just wanted a “lateral” move into some cheap index funds. Now we’re in cash and bonds because for the last two month’s I’ve been thinking “this rally can’t last, right?”. Guess what…

Sigh.

Telus is about 50% off its 2007 high and Rogers is about 40% off its 2008 high. Neither company rallied since March. I feel investment in such companies offer a margin of safety and reasonable return from both dividend and capital gains if the market continue to rally.

@CC: You are right though. I think Jeremy Grantham argues S&P500 fair value around 950 and he says it is highly possible to touch 1100. If S&P500 touches 1200, S&P500 would wipe most of the loss from the Lehman crash.

The technicals are bullish even though September and October are correction seasons.

@Mark: I haven’t read up or given much thought to the collar strategy that you advocate. I have a suspicion that capping the risk would mean capping the return as well, which may be worthwhile for certain investors.

@Michael: I don’t think investor mood has swung from fear to greed just yet. Investors still seem to be anchored to the market peaks of the previous bull market and still think they are 30% down from the peak. But if this keeps up, retail investors would start piling in. I agree with your comment on rebalancing.

@Phil: You may be right. One view holds that the current market bounce back can be attributed to the massive stimulus provided by Governments around the globe. However, as usual, I don’t have an opinion on whether the market is right or wrong but that the market’s guess is likely to be better than mine.

@Henry: I think REITs and equities in general are still reasonably valued. Bonds, emerging market stocks are definitely not undervalued.

@Jon: We can be sure of one thing — investors as a group are mostly wrong on market turning points. I don’t think this time will be any different, so the best course is to devise a reasonable plan and stick to it.

The only one that I can barely identify is natural gas and it is very difficult to invest in it.

Any ideas?