Four Ways to Profit in Any Market
Many investors have dropped their guard, relieved that the worst is behind us. Don't believe it.
When it comes to the global financial crisis, many so-called "experts" think the worst is behind us. But I don't buy it.
And I'm not alone.
Just look at what some other big-name investors -- each also known for their independent thinking -- are saying or doing right now:
- Bond king Bill Gross is nervous and raising cash.
- Author, commentator, and global-markets guru Jim Rogers has repeatedly said that he's not investing in stocks anywhere in the world right now.
- Hedge-fund heavyweight John Paulson is moving aggressively into gold.
- And investing icon Warren Buffett -- never one known for tipping his hand -- is candidly stating that the US financial-crisis cleanup is far from complete. The fact that he's reportedly buying more shares of Korean steel dynamo Posco (PKX) would punctuate this point.
Indeed, entire nations -- I'm thinking specifically of China, India, Brazil, Chile, and one or two others -- are adopting similar stances. And they're doing so for the same risk-fearing reasons. They want to grow their money but they don't want to place it at risk any more than we do.
This kind of uncertainty can be paralyzing, making it tough to decide where -- or even if -- we should deploy our investments.
Fortunately, we've been here before. And what we learned will allow us to profit no matter what the financial future holds for the US marketplace.
Using Past Losses to Zero in on Future Profits
A decade ago, in the middle of the euphoric ardor of the dot-com bubble, I warned that we were following in Japan's footsteps and risking a repeat of that country's "Lost Decade." A balanced approach to investing was the key to success, I said, and value and dividends would win out over growth in the decade to come.
The US stock market had become a giant casino -- but one in which everybody won -- so my warnings were ignored, and even ridiculed, by the "tech-savvy" investing set, whose members said I was out of step with the Brave New World of the World Wide Web. Never mind the fact that I have lived in Japan and spent nearly 20 years in Asia.
We all know how this turned out.
In 1999, if you'd followed the masses and invested $100,000 in the Standard & Poor's 500 Index, you'd have incurred an average annual loss of 1.1% -- leaving you with only $89,000 for 10 years of work.
Had you taken that same $100,000, and invested it using a simple stock/bond split (60% in stocks and 40% in bonds) -- maintaining that ratio by rebalancing the portfolio every December 31 -- you'd have reaped an average annual return of 4.3% for that same 10-year stretch and ended the decade with $300,500, according to a recent study by The Vanguard Group Inc.
There's a message here. Not only is it very clear, but it's one we repeat frequently: Successful investing isn't about "buy and hold" -- it's about "buy and manage."
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