What's Eating Q?

Let's eavesdrop on Q (the anxious investor) and A (the conventionally-wise advisor) as they discuss what's eating at Q...

Q: The market just had its worst quarter since the 1st quarter of 2009...
A: That's what they tell me...

Q: Should I get out of stocks?
A: Is it time to spend the money?

Q: Well no, I just don't want to lose any more...
A: Have you lost any lately?

Q: Well duh, it was the worst quarter in 3 years!
A: Yes, I know that... But how did you lose money?

Q: What are you talking about? I lost money because you have 60% of my portfolio in stocks...
A: Yes, I know that, but I don't see how you lost any money...

Q: Have you looked at my account lately?
A: Of course...

Q: You haven't noticed how much it's down?
A: Oh I get it - you think you lost money because your account value's down...

Q: You think I didn't?
A: Well, the way you look at it, you did. The way I look at it you still have all the shares of funds, etc. you had at the beginning of the quarter - in fact, you have more in the funds where you reinvested the dividends... If you haven't sold, in my view, you haven't lost...

Q: Alright I get that, but as far as I'm concerned I'm worth less money than I was 3 months ago... And I know you're going to say; only if I sell... But I do remember you sold some after our last review meeting... I don't recall why, but I wish you had sold more...
A: The reason we sold was because the market had done well and your allocation to stocks was up to 70%... We sold back to your 60% target... Which leads me to today's recommendation... Because stocks are down, your current exposure is 54%... We need to buy you back to 60%...

Q: But stocks are getting creamed. Shouldn't we wait and buy when things get better...
A: Notice how you said "when things get better", as opposed to "if things get better"...

Q: Well yeah, I know things will get better, eventually. But I see no reason for optimism at the moment...
A: Let me ask you a question; when do you think stocks are at their cheapest, when things look bright or when they look bleak?

Q: Hmm... Hadn't thought of it that way.. You're saying when things look bad, stocks are cheap - because everyone's selling... I guess that makes sense...
A: Man you catch on quick!

Q: So you think it's a good time to buy?
A: I think it's time to rebalance your portfolio...

Q: But you obviously think stocks are cheap...
A: I know they're cheap - compared to where they were at our last review meeting... Whether they'll get cheaper going forward is anybody's guess...

Q: So what if they get cheaper...
A: We'll buy more, back to your target, at our next review...

Q: And if they're up, we'll sell?
A: Yep, just like last time...

Q: I understand, I just hate seeing the declines on my statement...
A: Try to think of it in the context of our next review meeting... When you rebalance in a down market, you're exploiting an opportunity... That's smart investing... In essence; a decline in the value on your statement is nothing more than a signal that you'll be buying sometime soon... We want to be buying, not selling, in down markets...

Q: So down markets are good?
A: You betcha they are...