Friday, March 20, 2009

It's time to act

Fear is everywhere. There’s no question that we’ve lived through some pretty awful investment times. These past 10 years have been as volatile as any on record. Investors are still frightened, with plenty of good reason.

There are degrees of fright, though. Any stock market can be a frightening place. Peter Lynch often points out that the stock market – on average – has a twenty-five percent setback every five years. That magnitude, alone, is enough to keep many people in bank certificates. And the 2000 to 2002 Bear Market was recorded as one of the worst ever, now followed by the 2008-2009 meltdown. We’ve lived through them both, but it’s no wonder some people are terrified.

Perhaps the worst manifestation of fear is paralysis. This is the “deer in the headlights” syndrome that is so well-documented in nature (in fact, using bright lights to hunt is so predictably easy that it’s illegal). Sometimes, like with wild deer, things just seem so frightening to us that we choose not to do anything. Paralyzed by our own fear, we can become statue-like spectators to our own destruction.

Now is the right time to take positive action. True, restructuring a portfolio now can involve acknowledging some earlier mistakes. It might require changing how you do business or how you research investment decisions. It may mean that it’s time to dump the broker or other adviser responsible for those disasters. These aren’t easy decisions, but they are necessary considerations for future success.

Now is a unique point of opportunity. First, some of those earlier catastrophes could actually save a few dollars in taxes next April. Harvest some losses today and you’ll feel better when 2009 tax time rolls around.

Let an old proverb work for you. Shifting “all your eggs out of one basket” works even better when you can buy both eggs and baskets at bargain prices! If you’ve been devastated by losses, you probably lacked good diversity in the first place. Almost every sector is down again right now and this could be a terrific time, maybe the best in our lifetimes, to build a superbly diversified portfolio.

Now is the perfect time to hook up with a quality investment advisor. Marginal people have already left the investment business, and others will soon join them. The truth is that a sustained Bull Market like the 1990s attracted lots of friendly faces. Tougher times require professional diligence, skill, persistence, and – above all – a genuine desire to help clients. Good people survive, and now’s a great time to find one.

Above all else, remember this: Unlike the deer, we have the power to learn from our mistakes. Many mistakes are correctable, but to correct them, we must act. The sooner the better. Now is the perfect time to get started.

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