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We live in uncertain times. . . Or do we ??? 

There's certainly a lot of volatility in today's markets. It's hard to watch the market go up and down 2 or 3 percent per day. Your personal investments may even be going up and down 10 percent or more some days. But what is really killing you is the gradual downward trend of this RECESSION. Unfortunately, the way that "recession" is defined requires two successive quarters of economic contraction (negative growth), which you cannot possibly declare until (by definition) at least six months after it started. When it was finally analyzed, the recession of 2008 was found to have begun in December 2007, just as I had predicted. If you incorrectly time your asset protection, you are certain to completely miss the recovery, and lose on both ends. 

So it's NOT uncertain? 

If most everything else in the economy was looking strong, the current dip might pass in a few months, and the declared recession would never occur. But, in fact, there are many concurrent economic issues today that not only ensure a full recession, but as we see now, a longer than usual recession. Most of today's pundits are now telling you to steer clear of the market. However, there is far more upside than downside remaining. For this reason, it's now time to make the most using dollar cost averaging. By continuing to buy, a little at a time, the way your 401k essentially forces you to anyway, you can gain when the market finally recovers. If the market completely tanks, a prospect that is not impossible but IS impossible to plan for, we will all lost most of our investment in any case.    

I like to use the S&P 500 as a rough measure of the overall stock market. The DOW is rather silly, since it includes only 30 stocks, and the NASDAQ is too volatile, resting too much on how Wall Street views technology at any point in time. Looking at the S&P, you'll find that it peaked at about 1550 in March, 2000. It did not reach that level again until July of 2007! That alone is over seven years with a net gain of zero, and that does not even include inflation or fees! In contrast to the NASDAQ, which showed a huge drop in the Internet bubble of 1999-2000, the S&P was relatively stable. It then drifted downward for three years straight, until starting its recovery in 2003. And the S&P represents the vast bulk of U.S. stock equity. By the way, at the bottom of that slide, around 800 in October 2002, you would have lost nearly 50% of your entire nest egg, not including inflation or expenses!

But the S&P isn't MY stock or mutual fund! 

Ok, so the results above are way less than encouraging. And I know you're thinking, "My stock, or my mutual fund, has a much better record than this!" Well, if you really believe that you are consistently able to pick investments that beat the averages, you certainly should be writing a column like this one. But the fact is, the average pick matches the average. Approximately the same number of stocks (or mutual funds) will be better than average as will be worse, and there is not guarantee that past results will continue. In fact, they usually do not. So, you'll be lucky to do as well as the S&P, and may easily do a lot worse, particularly when your timing is also affected by marriage, divorce, job change, sickness, caring for relatives, relocation, or other factors. 

While nothing is certain, growth certainly doesn't look good!

The mortgage crisis accelerated an already-tenuous economy downward. The over-extension of credit, using home equity lines of credit and small down payments on home loans, simply could not go on forever. Recently, savings rates have actually been negative, meaning that people are spending more than they earn. As home prices drop, more people will experience financial stress at every socio-economic level. They will be forced to reduce their spending, further harming the economy. This is not a cycle that can be stopped in a few quarters. Recovery will require a recalibration of the financial mindset of an entire generation. That doesn't take a generation, but it will certainly take years.

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The Small Investor's Guide
New ideas for small investors