How to Avoid Blaming the Market for Your Losses

Invest smarter. There are at least two ways to achieve better results with your investments.

The first is to resist the mindset that makes you think your financial future is at the mercy of the stock market.

The second is to never EVER assume an investment will go back up because it is down 20-50% or because someone told you it will go up.

Try to understand that the phrase “long term” has a different meaning today than ever before. Hoping that the stock market will bail you out from your losses is a lot like sitting at a train station, waiting for a train that has been rescheduled for another time, only you never picked up an updated train schedule.

I was sitting in a health care provider’s office this week and could not help overhearing a patient’s conversation on her cell phone with her broker. My antenna always responds to words like, “how much did I lose?” or “I’m not worried, this is for the long term”. So, in other words, she’s in her car traveling west from New York on Rte. 80 in reverse gear; and it’s not a problem because she doesn’t need to be in Chicago until next month!

I have said it 100 times or more that an inordinate number of investors, quite like consumers, are brainwashed. College funds and retirement funds are objectives for the future, and for several unfortunate reasons, there is no real urgency about the present values of these accounts. This is a horrible shame.

Only a minority of investors are award that the Standard and Poors 500 index, which tracks the market value of 500 mid-to-large size companies, is down 9.5% for the past twelve months. A large number of mutual funds have a similar track record, regardless of their popularity. This is to say you would probably have more capital if you had parked your money in a money market account, instead of an index fund or a growth fund, for the past year.

A cheerful side to this report is that you can find growth and fixed income investments that outperform the market indices by a mile. Here are just a handful of stocks and closed-end funds that can get your portfolio headed in the right direction for your so-called long term investment plan.

McDonalds (NYSE - MCD) - up 15% since June 2007
Capstead Mortgages (NYSE – CMO) up 26.6% since June 2007 (does not incl. dividend)
Annaly Capital Management (NYSE – NLY) – up 22.4 % since June 2007 (dividend not included)

Regardless of the false reports you get and the misstatement heard around the market place, investors will find excellent opportunities to grow their money and be better prepared for the terminus to that life long plan they hold so dearly.

You’re welcome!

Bill Hudley