Investment Advice for the Next Ten Years

by Tom Madell, Ph.D. http://funds-newsletter.com

Given that many of us would rather not think too much about our investments now, the following ten thoughts are designed to be a quick read.

Thought 1: The Best Investment For Some People May Be One with Low Volatility

Stocks are great except when they are falling. So, if you don't like heat, you may not want to be in the kitchen. For all their volatility, stocks have proven to be a good investment for those who could withstand the drastic movements and hold on for 10, 20 or even more years at a time. If you can't honestly say this describes you, then forget stocks.

Thought 2: Don't Gamble - Invest.

If you were gambling, perhaps you had hoped to get rich by riding the huge past gains of stocks, the same ones chosen by the masses of other people. If you were investing, you sought out holdings that, while not chased after by most others, offered the possibility of decent returns for those who were patient.

Thought 3: What You See Is Rarely What You Get

Most people think that what is happening in the present foretells the future. However, in investing, this is usually not true, especially when the present "goes to extremes". After a multi-year rally is rarely a good entry point; after a multi-year fall is rarely a good time to assume the worst.

Thought 4: Does Everything in Your Life Go Smoothly?

More likely, most things do not. So, don't think that it's going to be any different for investing. We all face big setbacks and tremendous challenges. That's how it is. But people who persist are usually the ones who come out ahead.

Thought 5: Wake Up and Smell the Alternatives

The word "invest" has meant only in stocks for far too many people. If you want to do better as an investor, you should study up on other options as well. Don't want to risk all your money in stocks? Bonds are almost always a better investment than money market funds and your friendly bank.

Thought 6: Don't Follow the Advice of Others When Making Your Investments

That's because everyone's situation and risk tolerance are different. You shouldn't follow the advice of anyone unless it fits with your picture of things. However, you should listen to what other people might advise and then see if, and how, you might incorporate what they are saying into your own view. The same is true if you pay an advisor; make sure that advisor is on your wave length!

Thought 7: The Next Ten Years May Not Be So Good for Stocks

Although this may be true, what alternatives do you have? Keeping your money in a money market account? - probably not a good idea. Making sure you own your own home? - perhaps, but face it, real estate is subject to the same types of highs and lows as stocks, and I don't think homes can indefinitely go up in price at abnormally high rates either. Best idea: Invest in a variety of different things, including a variety of different categories of mutual funds, not just in large cap U.S. stocks.

Thought 8: Are We Really Headed Out of Recession?

Well, that has certainly seemed to be the case up to now. But what if the worldwide stock debacle continues? It is hard to believe that if people and companies have lost as much as it now appears and this does not turn around soon, that our economy can avoid turning downward. Ironically, if this happens, as unfortunate as this would be for the country, it would likely lead to continued good performance for holders of secure bonds.

Thought 9: Are We Becoming A Country of "Family Entrenpreneurs"?

Are we becoming a country where each household primarily resembles a profit and loss entity, almost like a separate business? Within such a climate, many of us feel compelled to work ridiculous hours and endure outlandish commutes. And we really feel the pressure to be home owners and the resultant pressure to maintain our home's value. And now, on top of the other pressures, we have our stock and mutual fund investments to worry about as well? It's no wonder that we're all feeling more than a little stress these days. It all seems to revolve just a little too much around money. Is this how you want to live? Let's think about relaxing all this a little.

Thought 10: There are 10 Letters in the Word "Investment"

If you think of each letter as representing a year, then you will be reminded of the true purpose of a long-term investment (as opposed to a gamble) - to help you achieve a better life 10 or more years down the road. Anything less than that means you probably aren't really investing; you're probably trying for something that's more like the lottery than able to reliably help you reach your goals.

This article courtesy of www.investment-index.com. You may freely reprint this article on your website or in your newsletter provided this courtesy notice and the author name and URL remain intact.