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During period from 1/25/91 to 10/13/00 my $10,000 investment grew to $37,840, which is a 14.67% compounded annual return.
On 10/13/00, based on a methodology I was following, I liquidated all of my domestic mutual fund positions and moved 100% to safety of my money market account. Thanks to this move, my portfolio retained 100% of its value on that date.
As we now know with hindsight, most people held on to their investment positions and have so far lost on average 50% to 60% of value of their portfolios. For this example let us use 50%.
If I had held onto my position, my portfolio would be down to $18,920. Last time I hit that level on way up was in 1995.
In other words, not only would I have lost 50% of my portfolio I would have lost even more by having used up 20% (8 years) of my total financial life.
How can you avoid mistakes like that in future? Spend a little of your valuable research time looking for investment methodologies that allow you to side-step bear markets and let you move back in during bull markets. In other words, invest your time looking at methodologies instead of investments themselves. This will lay foundation for more effective use of your money and time.
If you find a methodology that you like, and it matches your investment philosophy, stick with it for long term. It should have aspect of telling you when to get out of, as well as when to get into, an investment.
I suggest you follow these broad guidelines:
• Don't be afraid to take a small loss to avoid bigger disasters.
• Stay away from commissioned sales people (because they have incentives other than your best interests), and if you use an advisor, be sure he or she is fee based.
• Above all, don't get overwhelmed by news, rumors and predictions that are irrelevant to your strategy.
If you take this advice, I guarantee that pretty soon sleepless nights will be a thing of past and you'll be on your way to more confidently and successfully (that means profitably) managing your investments.
Ulli Niemann is an investment advisor and has been writing about objective, methodical approaches to investing for over 10 years. He eluded the bear market of 2000 and has helped hundreds of people make better investment decisions. To find out more about his approach and his FREE Newsletter, please visit: .