Thoughts on Market Turbulence...

By Kathy (kathycourt) Courtney

The market volatility of the past few months is probably going to continue
so you need to get used to it. If it is more than you can handle, perhaps
you need to get out of the market altogether. If you feel somewhat brave,
go into quality blue chip stocks or conservative bond funds, or even CD's,
and stay there, leaving all the volatile tech and biotech behind.

For the rest of us, who want to stay invested, there are some things we can
do during these turbulent times. Part of our portfolio should be in
conservative stocks or funds, but we don't want to completely miss the great
opportunity that is present in the new tech and biotech fields today. The
conservative portion needs to include enough money so that we will feel
secure. Diversification is key, and it can include small cap, mid cap,
large cap stocks, and/or funds. If some of your investments go down, there
will be stocks or bonds in other sectors to bring you through the
volatility.

Those who suffer the most during turbulence are either traders who want to
make a quick profit, or those who need to take their money out during that
time (for ex. down payment on a house). History has shown that anyone who
leaves his money in good quality stocks will recover after a downturn in the
market, and usually is ahead down the line for long term. This is one
reason that you NEVER invest money that is for monthly bills, house payments
or car payments. Only invest what you can afford to lose.

It is very difficult, and almost impossible, to time the market. Therefore,
if you want to purchase highly priced stocks with massive P/E ratios, you
can wait for the dips. Also buy using limit orders. The idea is to buy low,
sell high.

We should always hold stocks on an intellectual basis, not on emotion. We
might become hysterical and panic, selling quickly when we hear gloom and
doom about a particular stock by a friend or an analyst, especially when
they say that the market is about to crash. When this happens, it is a good
idea to write down your investment strategy, what investments you own (why
did you buy them in the first place), and what you want to buy in the future
(such as fiber optics, household goods, telecom, energy). An important
question to ask is "Why am I investing and what kind of an investor am I"?
Don't be swayed by negative analysts, who most times don't know what is
going to happen any more than we do. None of us can predict the future, or
we would all be billionaires!

When you buy a stock, there is no guarantee that it will succeed. This is
the basic risk in investing - you must realize you might lose all your
money. Therefore, as I mentioned before, it is essential that you only
invest money you can afford to lose, and never invest what you need for
living expenses or for emergencies. Invest with a long time horizon in
mind, at least 5 years, 10 years is even better.

If you do your homework ahead of time, and are not tempted by "hot tips" or
"sure things", you will have a better chance of success. Then you won't be
tempted to invest in unproven companies during bull markets or bailing out
of stocks during market declines. Look for the very best companies (such as
stocks in the S&P 500, Nasdaq 100).

If you do trade any of your stocks, don't buy or sell often, and if you do,
use a discount broker. This will hold down expenses. If you are going to
trade, do it in your retirement accounts, and the taxes will not be a
problem. However, never use these funds for speculation. If you do, you
might be left with nothing during those crucial retirement years when extra
income could help.

The best way to allow your portfolio to grow is to spend less and save more.
It sounds so simple, and it is if you discipline yourself. When my first
husband died suddenly at an early age, I started saving 20% out of my
paycheck and invested it in my company's mutual funds. It is amazing how
quickly I became used to living within that budget, and at the same time I
was building up a great portfolio.

Age also plays a role in how you invest. The older you are, the less risk
you can handle, as you don't have time to earn it again. If you are over
60, for example, your approach probably needs to be more conservative.

We are all different, and this also follows through in our investment
styles. My style is conservative. I am a long term buy and hold investor,
with most of my portfolio in large cap blue chips. I do own a few small cap
biotech and tech stocks, but none are penny stocks. Most of my stocks are
in DRIPs, so I reinvest the dividends and send in regular optional cash
payments. My portfolio has grown very well over the past few years and it
has happened without much selling or trading. I spend a lot of time
investigating the potential stock and I have had very few failures. We all
have a few, that is for sure, but the idea is to have more success than
failure, and don't get too greedy, that can be your downfall.

These are just some thoughts that I had concerning investing during these
turbulent times that I wanted to share with you. What are your ideas for
investing during these volatile days? I would love to hear others on this
subject. Join me on The Woman Investor board and we can discuss your ideas.