What Did 2009 Teach Us?

Financial Coach, Margaret Wittkopp
This is what Emma Johnson of MSN had to say in a December 28 column.

DOW 36,000? So Much for Predictions!

A decade ago, some stock market soothsayers forecast that the 2000's would bring staggering gains. Even more staggering now is how wrong they were. These people owe us, right? The analysts, the pundits, the experts. Every year they look into their crystal balls and tell us how to invest, whet to invest, what to expect, and what the future looks like. Sometimes we listen to them. Yet, much of the time, it's all stunningly wrong.

We couldn't have said it better ourselves! Here is what Margaret Wittkopp had to say in our quarterly newsletter.

As the year began we continued to experience the greatest continuous bear market (a decline that began in 2007) since the Great Depression. A turning point was finally reached on March 9, 2009.

We learned there will likely be no “quick fix” for our economy. And I found out that our investing philosophy works!

• Market timing does not work!
• Stock picking does not work!
• Track-record investing does not work!

The financial industry talks a good game about Modern Portfolio Theory and the value of being diversified, but how do they apply it? Sadly, most of the time it is “business as usual,” and the emphasis remains on actively-managed funds. That works well for brokerage companies. Remember the big bonuses to CEOs? It doesn’t work so well for the individual investor.

A strategy of waiting out the market doesn’t work so well either. The road to the bull market is littered with the bodies of those who waited for just the right buying opportunity or just the right prognosticator. It was just about a year ago that Bernie Madoff admitted to his multi-year Ponzi scheme.

Sometimes we are more comfortable with our long-held illusions than with TRUTH. Remember when everyone believed the earth was flat and that the sun revolved around the earth?

So what does work? Our approach remains the same. Be fully invested at all times, with the right asset allocation and risk tolerance, and you can receive market rate of return over time. If you have long-term goals you won’t likely be hurt as much as the investor who sits with cash while the market rebounds well over 50% (as it has done since March 9th). Proper asset allocation and a truly diversified portfolio can tolerate (even profit from) fluctuations in the stock market.

How does your portfolio compare to the market as a whole? Would you like to find out? Call us for an individual Free Market Investment Analysis (FMIA). Make 2010 the year you gain peace of mind about investing!

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