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

Finishing Touches

I think it would be a good idea if academic degrees were conferred, conditionally. One of the conditions being that we all write a short story about our lives when we reach a certain age, say, fifty. My finite wisdom has expanded noticeably since I became a serious writer, and I suspect the world would be a lot more interesting (and safer?) if every adult was required to pen their histories for posterity.

"Stock Power (The Novel)" became a life's work nearly two years ago when I envisioned the commercial value it might have when it finally gets published - sometime in March. Coincidental to the advent of the new year, I have been able to assess my outlook from an improved perspective. Since the day I wrote the first paragraph of my story, I have learned a lot about what drives drives me crazy, gets my goat, makes me tick.

Of course, a novel is a serious venture, especially if you want people to pay to read it. However, the process of putting something in writing after it swirls around in your mind is a fantastic thing! I'll take a minute and give you an example of what I mean.

I wrote about a woman I met toward the end of the story I'm writing. I described my feelings toward her along with the special moments we had together over the course of our eighteen month love affair. Trying to make it interesting for someone else to read was fun and challenging.

Last night, I read a passage from that section, for the first time in three months. Wow! I had overlooked the importance of the love affair. The greatest value of the relationship, for me, was in the fact that it could never last! In real life, I went overboard trying to make something work that had no chance of enduring a lengthy absense (the story's crisis). After I thought about if for a couple days, I was able to describe my motivation more honestly and with greater insight.

As a direct result from the effort that I have put into this project, my awareness of how I think and where my motivation comes from, has increased greatly.

Picture this: a notice comes to your mailbox in a large yellow envelope marked "URGENT". You open the envelope to discover that you are more than 30 days past due on a mandatory writing assignment. Subject: "What do you think you're doing with your life?" You're exempt if you write a novel.

Would that work for you?

BH