As the Bears Retreat, Reassess, Persevere and Diversify
The recent bear market gave many investors a real jolt right in the pocketbook. It clearly provided a wakeup call for those of us who invested heavily in tech stocks and failed to maintain a well-diversified portfolio. In hindsight, of course, all of us “should” have been able to see the impending market meltdown. In reality, however, timing the market is virtually impossible. The experts can’t do it, I can’t and neither can you. So, having cried over our spilled milk, now is the time to move ahead in a positive, constructive way to achieve our investment goals.
For most working Americans, stock ownership (primarily through mutual funds) has or will become their largest asset. The reason is simple. Most workers are depending on receiving retirement income from their 401(k) plans and individual retirement accounts (IRAs). While 401(k) and other retirement plans offer opportunities for investment in money market mutual funds and bond funds, the performance of these funds over long periods has been relatively poor. Over long periods, investments in stock have proven superior to bonds and money market funds. Consequently, on a long-term basis, stock mutual funds will remain a primary area for investment. (Of course other investment opportunities such as investing in real estate or collectibles are available, but these usually require day-to-day hands-on management and must normally be funded with non-tax-deferred funds.)