Find a Methodology and Minimize Investment Madness

There are many reasons to be investing these days, and too
much opportunity to not have your money working for you.

However, I believe the majority of people dread having to deal
with investment matters, and tend to jump into purchases and
then hold their breath hoping for the best. After a long day
at work and taking care of the family, it's hard to get
excited about reading up on your 401(k) options, Morningstar
ratings and fund performances.

If this sounds like you, there are basically 3 choices.

You can have your investments professionally managed, you can
continue as you have in the past & keep your fingers crossed,
or you can find a methodology that objectifies the investing
process (that's buying and selling investments) and helps you
maximize your long-term results.

To determine if you need help managing your investments(and
this doesn't necessarily mean having to pay for advice) you
might want to ask yourself these questions:

=> Do I really have the time and interest to follow the market
closely on a daily basis?

=> Have I done well in the past managing my own investments?

=> Do I really want to add another layer of work and
responsibility onto an already busy schedule?

If you're like most people, you would answer yes to some and
no to others, so how do you decide? If you think you could
have or should have done better with your investments, then
you need some help. Don't feel bad. Having counseled hundreds
of people over the past 15 years I can honestly say that
everybody needs some help, whether they are aware of it or
not.

Why? This could come as a surprise, but, in fact, your
financial life is a lot shorter than your physical life?

Most people who end up investing don't really start working
and making money until they are about 25 years old.
Considering the average retirement age of 65, this gives you
only 40 years to save and invest wisely.

If you make a poor investment decision, such as trying to stay
fully invested during a bear market, you could lose big both
in terms of diminished dollars and wasted time.

To drive home this important point, let me give you an actual
example involving my own portfolio. For ease of illustration I
have adjusted the beginning portfolio balance to $10,000.

During the 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 the 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 the 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 the 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 the 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 the 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 the long term. It
should have the 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 the past and you'll be on
your way to more confidently and successfully (that means
profitably) managing your investments.