September 19, 2009

How Are Your Investments Performing?

If you have been asleep for all of 2009, you have missed quite a ride in the stock market. Through Thursday, the S&P 500 is up over 20% for the year, and that is quite an accomplishment any year.

I don't believe that anyone saw a year like this coming, but hindsight is always 20/20. I am sure you will hear about people that bought in exactly at the bottom and have made untold amounts of wealth. Every time I hear someone tell me that their friend/relative/neighbor did, I just ask to see the statements. No one has produced one yet.

What I do believe is that the most prudent people watched their diversification, scaled back a little if they were nervous, but they tried to look long term. I wrote several pieces about trying to think beyond today and be logical. Emotions play a big part in our lives, but they can also lead to hasty decisions. I am sure that we have all experienced those moments, and I will be the first to admit that I have many times in my life. When it comes to financial matters though, it is usually the well thought out, informed decision that gives us our best chance for the future.

When I hear different people say that "now" they want to start investing, I think about the past six months. It is hard to imagine that we have come from the "brink" of the depression to a market and economy that seem to be pointed higher. The big moves in the market though are mostly behind us, but the future still looks good. I did want to point out some things I said in the past...

  • "In 2002, the the S&P 500 lost 23.37%. At the beginning of 2003, the market continued to trend lower, and a funny thing happened, it turned around. By the end of the year, the S&P 500 had gained 26.39%.

    I am not saying that 2009 will be a spectacular year and everything will be rosy, but if do your research and diversify your investments, you will at least be giving yourself a chance to participate."

    - January 14, 2009 - 2009 Investment Options for Your 403(b)

  • "This is not the end of the world. I know it is hard to believe, but America will survive. As Warren Buffett's letter to Berkshire Hathaway shareholders said over the weekend, 'Our country has faced far worse travails in the past,' he said. 'Without fail, however, we've overcome them.'"

    - March 3, 2009 (one week before the bottom) - Current Investment Options

  • "If you were to go back and look at the history of the economy and stock market, it would show you several things. First, when the Fed and US government start turning on the money, things happen. It might be like turning a cruise ship, but they happen. Second, the market points to a recovery well before the recovery is felt elsewhere.

    The stock market is essentially a predictor of the future. It is generally 6-9 months ahead of the economy all the time. The market started to drop in the fall/winter of 2007... the economy started to show some cracks in the summer/fall 2008."

    "No one can say that we are there yet until we see it in the rear view mirror, but the positives are starting to show. The market has turned up, the banks have said they will be profitable in the first quarter, and some good economic numbers have started to move positive from the negative slide.

    The market is never a smooth ride, but the signs are moving to a direction that makes the future much more acceptable. There will be bumps and drops (there always are), but the long term investor looks to have a brightening future. Just remember the lessons you have learned over the past six months..."

    - April 3, 2009 - Is History Repeating Itself? Looking Forward on the Market
Was I crazy, smart, or just trying to learn from the past?

My approach to investing is not radical or new, but sometimes it does test a bit of even my faith. I try to take the current outlook and look at it from a historical perspective. I cannot "see" the bottom or the top, but I can see what has worked, what has not, what has changed, and then decide what I think is the best approach. As a friend told me... "Boring!"

I hope all of you have done well thus far this year, and I hope I have helped a little along the way. As always, if there is is anything I can do to help, please let me know -

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