Greenfaucet.com - Global Market Commentaries

By Jim Farrish, greenfaucet.com

Tough times never last but tough people do. Robert Schuller's book is applicable to investors after a year like 2008 and the horrific start to 2009. Many have experienced what they thought couldn't happen. The shock of this experience has many running for cover and wondering how they are going to recover. We have to ask ourselves, what if anything did we learn from this experience? This is the starting point of dusting ourselves off and moving forward with a renewed vision for the future. Taking control of the process and learning from the past versus living it over and over again. When life gives you lemons make lemonade. In other words we have no one to blame but ourselves. With a disciplined investment strategy you have the three vital rules of success, a plan for entry, a target and an exit strategy. Armed with those even in this period of market destruction you would have protected yourself from the horrendous downfall in both stocks and bonds. So, how do we move on? The following five steps offer some help.

First put the problem into perspective. If you have lost money and are shocked by where you stand, it is time to face reality and deal with the problem. Stop listening to all the pundits and advisors tell you it will be okay over the long term. If you are down 50% over the last 18 months admit it and build a recovery plan. In other words it is time to face reality and start now building a plan to get where you want to go. The first step is to learn how to take control of your money and manage it. Put everything in perspective and move on.

Second look for the positive from the experience. When it is all said and done the positive in this experience is the infamous line, "I will never do that again!" It may be true for awhile, but you will invest again, but the key is to do so first with the knowledge of what you want and second, how to obtain it within the risk parameters you can tolerate. When I was 20 years old I had some money and a friend of mine (financial advisor) recommended a real estate limited partnership. In the early 80's these were popular and I put my money to work. Thirty years later I am still waiting for the return of my principle. The positive from that experience was I learned to ask important questions concerning risk, liquidity, etc. In other words I am now a better investors as a result of that experience. You will be a better investor as a result of your experience good or bad.

Third look for solutions to the problem - as painful as it may be, move forward. I have discussed with many investors the damage done to their 401k plans or IRAs. These plans are long term and many individuals didn't pay much attention to them. Buy and hold was the strategy because it was a long term investment. Even long term investments need a strategy. (Entry, exit and target) This simple three step process for any place you put money will keep you from making mistakes and more importantly repeating them. This has been a painful process and it may mean delaying the goal of retirement or worse. But, the solution to the problem is looking forward not backward. Dust yourself off, start where you stand and build your plan for the future.

Fourth find new enthusiasm with a new direction. I find learning energizes me. The more I learn the more fun I have. Investing is no different. You don't have to spend every waking moment learning about all the options, just focus on the ones that interest you and put your money to work based on your strategy. If you are retired and have to find a part time job to make ends meet for now, do something you always wanted to do. I have a friend who 15 years ago decided he had to do something different with his retirement life. He has been driving a bus at the Kennedy Space Center for tours. He and I grew up on the Space Coast from the beginning of the space program. He tells all the stories as if he was there and in his mind he was. The important thing is he is getting paid to do what he loves part time. I have another friend who works the Disney Cruise ships two days a week. They have both found things they like and it provides supplemental income as well. Find new direction to rebuild your portfolio and change your outlook.

Fifth experience new energy with a renewed vision for the future. We all have our concerns about where this country is headed, but every time something bad has happened we rise to the occasion. I know this, whenever the bottom to this market is established the investment opportunity of a lifetime lies ahead. Following every correction is opportunity to make money. It is never in the same spot so you have to prepared to invest as the opportunity presents itself. This is the importance of the first four points laid out above. Your attitude must be in place in order to first see the opportunity and second to be willing to take advantage of the opportunity. Stinkin thinkin will not allow you to see it nor take advantage of it. Regardless of how bad it is or was, you must have a vision for the future in order to capture the opportunity it will present. To quote Napolean Hill, "in every defeat is the seed of equivalent or greater benefit." You just have to have a vision for the future.

Implementing new rules (discipline). Taking control of your financial future is up to you not someone else. I have been a financial advisor for more than 24 years and too often our mentality is to give our money to someone else and move on. We invest in a 401k plan because everyone else does. We believe the greatest lie ever told about investing - focus on the long term. Most people have a hard enough time planning a family vacation let alone their financial futures. Ostrich investing isn't going to cut it. We don't have the 30 year plan our parents generation lived under. Social insecurity isn't going to get us there either. It's your money - Manage IT! Yes, it takes time. Yes, there is a learning curve. Yes, it will be challenging. I understand you don't have any time now. But, if you don't take control of your future who will? You can recover from the mistakes of the last 18 months and you can create the future you always dreamed of, but it starts with you and it starts now.

"If we can't understand the errors of the past we are doomed to repeat them. Understanding the future is not living in the past."