Recent news headlines:
- Economic data is ugly.
- People all across the country are losing there jobs.
- 2009 has been the worst start (by far) to a year since 1900.
- Stocks just had one of the worst months since the 1930s.
- Stocks ended trading on Tuesday at a new 12 year low.
Some questions that might be on your mind:
- Have we hit bottom yet?
- Where is the bottom?
- When will we hit bottom?
- Can things get any worse?
- How much worse can this get?
- Where will we be six months from now?
- How long will it take to recover these losses?
The answer to those questions: NOBODY KNOWS! And if anybody tries to tell you they do know, don’t trust them. Nobody knows with certainty where the bottom is or when it will happen. No one knows how long it will take to get back to the October, 2007 highs.
Here’s what I do know:
- Previous bear markets have not lasted forever.
- Twelve year lows are extremely rare. It’s also interesting to note that the 12 year low in 1932 was just three months before the end of the bear market. In 1974, the 12 year low was exactly the low for that bear market.
- Investor confidence is very low. Periods of extreme pessimism occur near bear market bottoms.
My advice:
- Avoid making any emotional decisions. Fear is a very powerful emotion. Fear can lead to negative investment behavior. The greatest investors are able to control their emotions.
- Embrace uncertainty.
- Have patience.
- Don’t follow the crowd.
- Get advice from an expert before making major changes to your investment strategy.
