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Welcome to Our Newsletter! Greetings!
Undoubtedly the stock market, real estate market, and the economy have you at least somewhat concerned. Much of what happens is out of our control. While that likely causes the majority of our stress, it should be a reason to calm down. Step back and tell yourself: if I can't do anything about it, I should focus on the areas of my life that I can control. Easier said than done, I know. This month's newsletter reviews your options during turbulent times.
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Short Term vs Long Term 
Depending on your thoughts for the economy and your time horizon, you may decide to take one of three paths: to safety, to ignorance, or to to the roller coaster.
Safety
Those searching for safety typically do so out of fear or concern for the economy. Those motivated by fear often follow the herd. If everyone else is selling, they want out. They're worried that those in the know already have their money out of the market, and if they don't move their money to safety soon, they may lose it all.
Of all of the options, moving money around due to fear is likely the worst strategy. Even those who are able to get their money out prior to the market hitting "bottom" are likely to wait the longest before reinvesting their money. They may want to wait until they have seen weeks or months of positive returns before they get back in. At that point, they are likely to get their money invested at a level above where they got out. In doing so, they are "selling low and buying high(er)". This is the exact opposite of the strategy that investors want to employ.
Don't get me wrong. If you're overly worried about the market and how your account is performing, then maybe you should have had a more conservative portfolio all along. It's easy to be aggressive when the market is up, but if you can't stomach the down turns, then you should stick with a mix more suited to your risk level. Also, if you have a short time frame, you should have little if any money in the stock market.
Those who believe that the economy will continue to move downward may be justified in selling. If you not only believe that things will get worse but also that you can get back in just when the market turns around, then more power to you. Remember, however, that the stock market is frequently a leading economic indicator. While not always so, the market has frequently moved up/down about six months prior to the economy moving up/down. If that's the case this time around, you'll need to project the economy's turn around about six months prior to catch the initial market upswing.
Ignorance
In the immortal words of Sergeant Schultz, "I know nothing!" Ignorance can be bliss for some. During times such as these, many people tune out the bad news as best they can. They may turn the channel on the TV or skip sections of the newspaper when they know stories covering the economy are coming. Many also choose to avoid opening their investment account statements. For obvious reasons I cannot condone or suggest that people refrain from opening their statements, but it does appear to bring peace of mind to many.
Typically these investors stick with their plan. They believe that the economy and market will improve sometime in the future. Their portfolios were designed to meet their tolerance for risk and they believe that their diverse portfolio will help them weather the downturns.
Even those who are retired understand that they may need income for many years to come and recognize that the stock market is an important piece to their future income needs.
Roller Coaster
People optimistic about the long-term prospects for the economy and markets may view weathering the down markets as a small price to pay for the rewards they seek. These are people with extra cash or money in bonds that move money into stock investments as the market declines. In doing so, they "buy low" with the intent to "sell high" at a future date. While this strategy may provide the best opportunity for profit, the turbulent ride would make others unable to sleep at night.
My suggestion for all investors is to talk with their financial advisor about their questions and concerns regarding the markets and the impact the economy may have on their portfolio. When you meet with your advisor make sure to review your investment mix, evaluate your risk level, and decide if you want to move to safety, stay with the status quo, or act while the market struggles.
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Office News 
Come out to Barcstoberfest on Saturday, October 18th from 11am to 4pm and visit our booth. The event is held at Patterson Park just up the street from our office and has food and activities for people and pets alike. More information can be found at: Barcstoberfest 2008.
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On the Home Front 
As you may recall from last month's newsletter, I went to the Florida Keys with four of Heidi's brothers. I'm glad to say that I made it back in one piece and that we had a great time. We're hoping to make this a regular event.
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I hope you enjoyed this month's newsletter. If you know of someone else who may find this newsletter of value or who you believe may need our help, feel free to forward our newsletter to them by using the "forward email" link on the bottom left of this page.
Best Wishes,
Woody Derricks
President
Phone: 410-732-2633
Toll Free: 877-807-2633
Fax: 410-732-2634
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Available by Appointment in Alexandria & DC.
Woody Derricks is also registered to discuss and transact securities business in:
AK, CA, CT, DC, DE, FL, MD, NJ, NY, PA, RI, VA, and VT. |
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