Could buying stocks, exchange traded funds (ETFs) and other securities be the answer to recoup losses of 2008? 

This downturn could be longer than anyone thinks, or we could begin recovering next week. But there’s something every investor can do while they wait: save.

Historically, in a down market an investor could hold securities, ride out the wave and wait until the next bull market to come around and be okay. But this time around, it’s different. The S&P 500 has lost more than it usually does during an entire bear market and we don’t know when this bear market will go into hibernation.  Investors will have to step up their savings if they want to break even, states Paul Lim of The New York Times.

It would take four years to break even on a pre-2008 market crash portfolio assuming that the bear market is over and stocks are on a multi-year surge and investors are 100% invested in stocks. 

Unfortunately, this is not the safest assumption to make.  It will probably take the economy a few years to bounce back from the burst of this most recent bubble and research has indicated that investor confidence isn’t skyrocketing.  In fact, the amount that individuals have tucked away in a 401(k) plan has decreased in 2008 when compared to 2007, and of these assets in 401(k)s, they are shunning away from equities.

Don’t forget about your 401(k). It’s tempting. Times are tight, and many may feel that they desperately need the cash right now. Research has shown that many people are still contributing, which is good news. This will be to your great benefit when the market recovers.

A buy buy buy strategy may be the answer if you’re feeling super aggressive, but at the end of the day it is all about investor strategy, risk aversion, and how close an individual is to retirement. We’ll stick to the strategy of using trend lines to dictate when we’re in and when we’re out.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.