Thoughts on the "fiscal cliff"

In talking about noisy markets, one could get dizzy trying to ferret out all the talk about the fiscal cliff and what it means to investors. The trader part of me wants to try to time this event, thinking that a good strategy would be to get out of the market in case no agreement is reached. I would then get back in after the sell off has occurred from very nervous investors/traders dumping their holdings at any sign of trouble.  On the other hand, the rationale part of me says that one cannot possibly predict with any degree of certainty what direction this market is headed. This is because no one can accurately predict what the politicians in Washington will do regarding the fiscal cliff leading to rising taxes, and cutbacks in government spending. 

 As for me I have decided to stay put, knowing full well that risk resides in doing nothing, but probably not as much risk as trying to predict what will happen with the fiscal cliff. Any changes I make between now and the end of the year will be in response to long term planning, such as transitioning from individual stocks and investing more in index funds so a broaden my exposure to the market. Making changes in response to long term planning is good for a portfolio as long as one has and is following a well thought out plan. The short-term variety of change (i.e. in response to the fiscal cliff) will generally lead to wrong decisions in either direction, or if one is unlucky, to a wrong decision in both directions.