Things are never as bad, or as good, as people tend to think.
The reason the Dow and the S&P got so low (in 2009) in the first place was because people were panicking, perhaps rightly so, and it just kept going down and down.
But it doesn't always do that. Just as trees don't grow to the sky and their roots don't go down to earths core.
Anyway...
The answer to your question "What is the best thing, given all the information, that people in our situation should be?" is, in my opinion, "Patient".
It really depends on what your assets are in that IRA. Are you mostly in Mutual Funds? If so, you should bear in mind that Mutual Funds perform best for a holder of them over the LONG TERM. Trading into and out of them is ill advised, REGARDLESS of what the market is doing.
Are you mostly in individual stocks or bonds? If so, then you might consider taking profits on any that you have large gains in, as that would be a common and logical move. But under no circumstances is it logical to sell under a panic scenario any more than it is to buy heavily when market euphoria sets in. As the saying goes, when everyone is running for the exits and there is blood on the floor, that's when the smart investor stops, turns around and heads back inside. Conversely, when everyone has their heads in the clouds and is buying like crazy, that is the time to be more careful.
Looking back at the time frame from late '07 to early 09', do you want to know what the perfect play was?
Selling equities and going to long bonds.
If you had sold every equity position you had in or around September of 2007 and bought 30 year Treasury Bonds, held those for a year and sold them, you would have seen a 45% gain when everyone else was losing their shirt.
Why?
Because recently issued 30 year paper back then had a coupon of 4.5% and they were selling for between 96 and 98 cents on the dollar. If you had held them from Sept. of 2007 until December of 2008 when the yield bottomed out at just over 2%, you could have sold each one of those bonds for $400 MORE THAN YOU PAID FOR THEM. Not only that, but would have been paid $45 in interest on each one for the pleasure of holding them. Not long after that, Ford Motor Company stock bottomed out at less than $1.25 a share (it actually got to $1.01/share during one trading session, then started shooting back up). If you had taken the proceeds from the sale of the bonds and bought Ford, well.... Ford peaked at over $18 back in January of 2011 and is currently trading in the $16 range. If you had started with $100 grand in the above scenario you could sell your Ford stock and retire. (You would have over $1.5 million today)
Of course, hindsight is ALWAYS 20/20
Unfortunately, that will not be the case this time because it will be precipitated on a Treasury default so if we have a crash the market on treasuries will crash along right with the stock market, that is, if all hell breaks loose.
The thing to do in that case would be to watch the yield on Treasuries and when it is through the roof (as in way above 5% on the ten year, for example), buy the bonds like there is no tomorrow. When things get back to normal, those will have gone up in value as the yield settles back down.
But I doubt all hell will break loose. No one, and I mean NO ONE, including the fucking Koch Brothers wants to precipitate a world wide depression, and that is what could happen if the Treasury is forced to default. OK, Maybe fucking Ted Cruz would like it, but no one that is in charge or that has any brains at all wants it.
If your holdings inside your IRA are indeed "conservative" as you said, then it is likely within your risk tolerance. If you can't tolerate any risk, then you shouldn't be an investor. If you can, then, as I said above, be patient.
More important than ANYTHING I have said however, is that you are able to sleep at night. If you think it is best to go to cash because that will make you more comfortable, then that is what you should do, and don't let anyone tell you otherwise.
But don't do it merely because you are in a panic. Do it because it makes sound financial sense for YOU.
(I deleted, edited and re-posted for personal reasons)
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