Will You Be in the Investment Markets Before the Next "Tipping Point?"

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As I write this at the end of July 2009, the D.J.I.A. has yet another triple-digit winning day. It went from its low, south of 6500 in March 2009, to just north of 9k at the end of July. It did so in the form of strong gains, a slight pullback, and new strong gains, a great 'bullish' sign if you're a student of the markets and their moves like me.

But great as it is, my positions in emerging markets and real estate make the gains in US markets look small in comparison. Baron Rothschild, a 19th century English thief baron and one of the richest men in the world once said: 'Buy when there is blood on the streets … even if it is yours." Great advice, I guess there is a reason he was one of the richest men in the world.

Unfortunately, in all of this there is the other side of the coin. This group, still scared of the latest stock market crash, one of the worst since the Great Depression, continues to shop among the pathetically low interest rates of banks and credit unions for ALL, or part of their money in the long run. Unless the market collapses tomorrow, almost all of my clients will end July with a MONTHLY return above 4%, and I can't even find a bank, online or physical, that offers a 4% rate for FIVE. YEARS. I wish I could have attributed this performance to being in this select group of experts who are 'in the know', but as most people who read my articles on it know, will know. investing, I am a fan of passive investing. All I did was properly allocate my clients' investments between more or less correlated asset classes, and keep expenses low by investing in exchange traded funds ( ETF), the market did the rest on its own.

The aforementioned group of people, however, are the "breast milk" of the cockamamie projects set up by infomercial marketers at 2 a.m. They oscillate between fear and greed by refusing to believe that the “holy grail” falls somewhere in between these two extremes. They believe that somewhere there is someone, a guru, who can time the markets consistently, and they aim to find his secret, through trial and error, no matter how many of their hard-earned dollars. , they bleed in the process. They never seem to grasp the idea that successful people in the world set a goal or a strategy and stay as rock solid until the goal is achieved. Of course, they're a bit rushed and bruised by life along the way. But the world always seems to make room for people who know where they are going.

Several years ago an author named Malcolm Gladwell wrote a book called “The Tipping Point”. If you're a noisy reader like me, I would highly recommend adding this to your 'must read' list, and no, I don't get paid anything by the author or Amazon to hook the book up, it's just awesome and insightful read. This is what will happen to the investment markets. It will reach a 'tipping point' where it will begin to climb to its previous highs by leaps and bounds, more than recent significant gains, just as it did on the downside in '07. I guess this will happen if the Dow Jones shows strength around 10,000 because 10k is a big number on most people's minds. The people who have followed Baron Rothschild's advice will be the ones who will make the most money. It has been proven countless times before that if you miss 60 days of just over 5,000 trading days in any given bull market, your return difference can be as much as 9% versus – .03% as than measured by the S&P 500. Sadly, there will be people who will wait past the tipping point, whose internal compass changes from fear to greed, and they will end up with table scraps thrown on the floor. but at the same time, the "table scraps" will still blow the little CD returns, but they are tiny compared to those sitting at the table who may have eaten the prime rib!

The best answer always has been and always will be: stay fully invested in a REALLY diversified portfolio (and that DOES NOT mean having 5 different stock mutual funds all invested in the same stocks, look inside many plans 401k, you'll see endless examples of that) depending on your timeframe and tolerance for risk / volatility, and rebalance regularly. Keep internal expenses low (ETFs are great for this) and only use jabber in the market for short-term play money (ALWAYS have a sell rule to get out of those bets {hey c & # 39; (That's what they are, educated guesses!}, And don't make it a big part of your wallet.) Finally, enjoy plenty of investment artcles and TV shows for what they really are, a reporter or actor doing their job of reporting the news and / or entertaining people.

The bull will rise again, it always comes after the bear leaves. The question is whether his arrival will see you as the early riser or the 'johnny come lately', the differences in the end results are vast, the time to decide is yesterday. Choose wisely and good luck.


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