Yes, I know that the term "Fiscal Cliff" is both annoying and metaphorically incorrect. Yes, tax increases and spending decreases will go into effect, but the only immediate effect will be on your take home pay in your pay check. The tax increases will not be set in stone until the end of the year. If an agreement is made to stave off the tax increases and spending cuts, then you will not have to worry in the short term. The Fiscal Cliff is more like a snow ball that is rolling down the hill and getting bigger and faster as it gets closer to the bottom. That is how the current fiscal situation will effect us.
The major problem lies in the long term, whether or not the agreement between the GOP and Dems. is reached. Either way, this situation will create a tremendous opportunity to buy into the stock market. This opportunity is only for individual stock investors that are also long term investors and not traders.
If you've been following along, the future is not looking good. Long term investors have to be nimble and probably stick with blue chip, large cap stocks. Mutual funds are still ok for the set it and forget it investors, but you still have to check in to see if the top ten holdings of each fund you invest in are in line with the risk.
I, myself, being an investor in individual stocks, have been building my cash base. There are going to be a lot of buying opportunities in the next 6-12 months. As I always recommend, buy in slowly and get out slowly. That will always serve you well in the long run. Good luck in 2013.
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