SMI Visitor's Blog       

Welcome to the SMI Visitor's Blog where you'll find selected excerpts from our Member's Blog, plus occasional posts created especially for our visitors.

For SMI Web Members, click here to go to the SMI Member Blog.

« Blog Home

On the outside looking in?

With the first quarter of 2010 continuing the market's solid uptrend, here are the approximate results Sound Mind Investing readers who use our Upgrading strategy or Just-the-Basics indexing approach have experienced since the March 2009 low (through 3/31/2010):

• +80% SMI Upgrading
• +74% S&P 500 Index (large companies)
• +98% Russell 2000 Index (small companies)
• +74% EAFE Index (foreign companies)

This is exceptionally good news for those who stayed the course, but a bit of heartburn for those who headed for the exits during the dark days of the bear. A friend (who knew better and shall remain nameless) sold his stock holdings until a more promising investment climate took shape. The problem has been (and will always be) that the market begins heading up many months before a "promising investment climate" becomes evident.

So, what to do? I suggested he figure out how much of his money should be invested in stocks (based on his season of life and other factors we explain in our publications), divide that amount into four parts, and invest the first 25% immediately. I suggested this, not because I have a particular view as to what the market will do in the short-term, but because my friend needs to overcome his paralysis. If his goal is to get back into the market, then the only way I know to do that is to start getting back into the market.

Now, whether he takes this first step with 20%, 25%, 33%, or 50% of his total stock allocation is a matter of personal preference. I chose 25% because that didn't seem too bold a step, given his current fear that he's waited too long and may well be investing at the end of the rally. But you've got to start somewhere, and this approach still left 75% safely on the sidelines.

I suggested he wait 6-8 weeks and see if he felt comfortable putting another 25% in at that time. It would be nice if he had a little profit by that time to encourage him, but there's certainly no guarantee of that.

I don't know what his decision will be, but thought I'd pass along our discussion in case there are others like my friend — on the outside looking in.

If you're not investing effectively for your financial future, take a few minutes to learn more about SMI's time-tested strategies. For details on how to become an SMI print subscriber and/or web member, just click sign-up button below.

Powered by Movable Type  |   Subscribe  |   Email Updates