Layoffs, foreclosures, cutbacks – there are plenty of grim economic stats out there this holiday season. Here’s perhaps the grimmest one of all: Calls to National Suicide Prevention Lifeline hotline have soared by as much as 60 per cent over the past year.

Mental health experts say the sour economy has turned what usually manifests as seasonal blues into a full-blown crisis. The fear of losing one’s job and pressures caused by a downturn in business, demotion or pension plan cutbacks can be bad for mental health and therefore increase suicide risk.

“Fear is the No. 1 emotion we’re hearing. People are feeling hopeless and helpless because of the economic crisis, and many feel that things aren’t going to get better. Now many of the calls are from people who have lost their home, or their job, or who still have a job but can’t meet the cost of living.”

A 90-year-old woman in Ohio shot herself while being served an eviction notice. A 45-year-old businessman in Los Angeles murdered five members of his family before turning the gun on himself, saying in a suicide note that he had done so because of his troubling financial situation.

While these stories put a human face on the toll the financial crisis has taken, the Director General of the World Health Organization this may only be the tip of the iceberg. As people struggle to cope with losing their homes or livelihoods, she said, “It should not come as a surprise if we continue to see more stresses, more suicides and more mental disorders.”
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To those who can recall the stories of bankers jumping out of windows across New York at the beginning of the Great Depression in 1929, the correlation between a financial crisis and an increase in suicide seems quite real.

A person with depression can blame their depression on whatever has been in the news recently, so some might begin to say that they are depressed because of the financial crisis. But the financial crisis isn’t necessarily the basis for the illness in the first place.

Indeed, one study conducted by the WHO on Suicidal Behavior showed that a majority of suicides and suicide attempts committed by men were done so by those who were considered “economically active” (i.e. employed). That same study showed little annual change in numbers of suicides from 1989 to 2002, despite great economic changes after the fall of the Iron Curtain.

“Simply because the financial crisis exists doesn’t mean we can assume a higher number of cases of depressed persons. It’s more complicated than that.”

It will be tough for Wall Street to shake off the bear market blues next week if the price of oil keeps rising and the earnings season kick-off from Alcoa and General Electric disappoints investors. Stocks will remain vulnerable to any new signs of distress from hedge funds hit by their exposure to bad U.S. home loans, as well as from credit markets, where Wall Street firms and corporations are finding it harder and harder to obtain financing.

Oil has become the biggest wild card for growth and corporate profits. It jumped to a record above $145 a barrel on Thursday, driven by tensions between Israel and Iran, before the long holiday weekend to mark US Independence Day.

The price of crude is up 50 percent so far this year.

On Friday, US markets are closed on July 4th for the Independence Day holiday.

Financial results from Alcoa and GE will kick off the second-quarter earnings season next week. Aluminum company Alcoa, the first Dow component to report results, will release its quarterly numbers on Tuesday. GE, another Dow industrial and a bellwether for the US economy, will report earnings on Friday. Aside from second-quarter results, investors are anxious to see the companies’ forecasts for world economic growth and their own corporate sales prospects.

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More clarity on the economic outlook may come from Federal Reserve chairman Ben Bernanke. He is expected to speak twice, first at an FDIC mortgage lending forum on Tuesday and on Thursday, he will testify before on financial market regulation before the House Financial Services Committee.

But it’s oil that will remain a top concern.

“The price of crude oil is on the top of everyone’s list,” said Dan Peirce, a portfolio manager of the global asset allocation group at State Street Global Advisors in Boston.

“We saw a pullback one month ago, only to see it come back with a vengeance, which really pressured major equity markets.”

Expectation was high that a combination of a weak US dollar, lower US crude stockpiles and tension between Israel and major oil producer Iran would push prices to $150 a barrel before the close of trade, in line with a prediction made last month.

For the holiday-shortened week, the Dow Jones industrial average ended down 0.5 per cent, the Standard & Poor’s 500 Index slid 1.2pc and the Nasdaq Composite Index dropped 3pc. This was the fifth straight weekly decline for the S&P 500 and the Nasdaq, and the Dow’s third straight week of losses.

On Wednesday the Dow closed more than 20pc below its all-time closing high reached in October, crossing the threshold typically considered as the onset of a bear market.

The Dow closed above that mark on Thursday. But the broader S&P 500 index on Thursday slipped into bear territory during the trading session, unable to withstand the avalanche of gloomy global economic news and profit outlooks, surging inflation fears and weakening consumer confidence.

While the S&P 500 eked out a slight advance by Thursday’s close to climb out the bear market, optimism appeared scarce that there would be enough bargain hunting next week to help stocks decisively snap out of their slump.

“We’ve become nervous bulls,” said Brian Gendreau, a New York-based investment strategist at ING Investment Management Americas, which recently went “neutral” on US stocks.

“Equities have become a play on oil and we just do not know what oil will do. So we are on the sidelines for now,” he added.

General Electric, the second-largest US company by market capitalization, will garner a great deal of attention when it releases quarterly earnings at the end of the week.

The company is viewed as an economic bellwether because of the range of its businesses. Since financial services account for a large chunk of its revenues, GE’s results are also scrutinised for clues on the health of the financial sector, the biggest drag on the stock market this year.

Reuters Estimates sees GE reporting profit of $5.33 billion in the second quarter, or 54 cents per share, compared with year-earlier earnings of $5.4bn.

Results deviating from forecasts are expected to wield a disproportionate impact on the market, for better – if earnings are higher than expected – or worse, if the company misses earnings, such as occurred in the first quarter.

Fresh in the market’s memory is GE posting an unexpected drop of 6 percent in first-quarter profit, with an EPS of 44 cents a share, 7 cents below analysts’ forecasts.

The news drove GE’s stock down nearly 13pc, their sharpest drop in two decades, wiping out about $45bn of market value and dragging global markets down into the mud.

The earnings figures aside, the stock market will be looking for market direction by poring over what GE has to say about the next quarter or two, said Andre Bakhos, president of Princeton Financial Group in Princeton, New Jersey.

“They (investors) don’t want to hear about a slowdown in any major economies,” he said. “They don’t want to hear about paring back revenue estimates. That would exacerbate already heightened fears of recession woven into the market.”

Alcoa’s earnings on Tuesday will be put under the microscope for comments about industrial demand in economies abroad, particularly Asia and South America, he said.

Now, is it time to quit? Will the bubble burst? The investor has many questions and very few options before him. Strategies for a rising market are crucial and much depends on the risk appetite of the investor.

Don’t sell into the panic. Don’t buy the greed. This is of course obvious to say, but harder to execute when it is actually happening. When you have extreme market conditions, the individual stock movements can be big and rapid, and they are not necessarily, and in fact, usually not at all, related to fundamentals or economics.

Will the upswing continue? This is a difficult question and much depends on the factors that contribute to the bull run. Many perceive the market to be over-heated and fear to set foot in it. Others view corrections as an opportunity to make quick money. But this calls for quick decision-making and considerable tolerance to risk.

The unfailing strategy is to buy great companies with long track records of rising stock prices and dividends. Pick them low and hold on. Over a long haul, such companies with good fundamentals will not fail you. It is not unusual to find some stocks faring poorly in a bull market and some doing exceptionally well in a bear market. A bull run implies a booming economy, low unemployment rate, high production of goods and low inflation.

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Don’t use any meaningful amount of margin. Additionally, the data shows that with the use of margin, your long term expectancy does go to zero.

Investors must make judicious decisions when it comes to investing their hard earned money in the markets. Some stocks may become highly overpriced. An overpriced stock in a heated market is sure to burst when the bull run ends. Some investors prefer to sell all their shares and make profits. Another strategy is to sell some of the shares and buy back the stock when the price falls back to reasonably low levels.

The value of equities tends to rise fast in a bull run. Predictably, the equity investments in your portfolio will become disproportionately higher. Depending upon your age, objectives and financial obligations, you would have arrived at an asset allocation plan.

Those who feel the country’s economy is poised for a consistent growth and global factors more biased towards Indian markets, may predict the Sensex moving upwards. Such investors who can take short-term volatility on their stride can remain invested for some more time. They can hold on and see more profits.

Turn off “the noise.” CNBC, blogs, web sites, the Wall Street Journal Newspaper….whatever. The news is filled with superlatives right now, “biggest ever,” “worst ever,” “most ever,” “going out of business,” “recession,” “depression,” this talk just adds to the fear and panic and has the chance to steer you off course from your plan.

For others who have multiplied their money, even though the investment period may be very short, simply book profits and be happy with it. Some investors feel political uncertainties, oil prices, global economies and events can overturn the joy ride. Simply book profits and reenter once the market cools down.

Booking partial profits is the best thing to do for the investor who is in puzzled about his next move. The market ups and downs follow cyclic patterns. For now, it is the time of rising index and increasing volatility. Yes, increased investor enthusiasm and optimism keeps the index hovering around the big numbers. But the possibility for a bubble burst looms large and investors must keep it in mind.

You might be saying to yourself that greed and fear will never get in the way of my trading, but believe it or not they will be. It is not something to be ashamed of. It is something you have to admit to, come face to face with, If you are to become a successful stock trader or investor.

What do greed and fear look like in the stock market trading arena? “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” Warren Buffet

Fear doesn’t form in a vacuum. It is a learned response to a particular event or probability. In the case of trading, when you have a trade that goes bad, the regret and frustration can carry over into the NEXT trade. Or worse, the fear is so consuming, that you don’t enter your next trade. This particular problem is fueled by the expectation that every trade you enter should be profitable. If you truly believe that, then here is an important piece of information for you – not every trade will be profitable!

Greed creates the opposite problem. With a couple of consecutive winning trades, the ego can enlarge and feeling invincible overcomes being logical. This will ultimately lead you to trades that you normally would not have entered.

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You have been watching a particular stock for some time now. It has set up perfectly, so you pull the trigger. You bought it at the perfect price and now it is moving higher just as you thought it would.

Now greed steps up to the plate and says to you, this is going to be a rocket ship. So you buy some more shares. Or your stock moves a few points and goes passed the price that you decided to get out. Greed tells you this baby is going higher tomorrow so you hang on.

When stocks make strong moves to the upside greed from all the cumulative market participants joins the move. Stock prices usually fall faster then they go up, and when this happens, fear now steps up to the plate.

Lets look at the example above, where your stock went through your get out price and you held on because greed was by your side. The next morning the stock price gaps down. Their is heavy selling all morning long. Greed is telling you to hang in there the price will come back. The price keeps going down, now you get a knot in your gut, and your knuckles are turning white. Fear is now by your side, but by now it is to late, your nice profit has turned into a loss.

Everyone goes through this until they have mastered the ugly faces of greed and fear. Master this and you are well on your way to becoming a successful stock trader.

Regardless of your current opinion, you are better served by feeling with your heart, while investing with your head. Are fear and greed driving your investment decisions right now, or or you in control of your emotions? If you’re not sure, I’d recommend taking a step back and looking at the market from a different angle……an unemotional one.

The fact that this market roller coaster is being pushed by a credit crunch instead of surging inflation or some other economic disaster doesn’t change the need to take a deep breath and sit tight.

Corrections, pullbacks, or whatever you want to call them are a natural part of the market cycle.

If you take a look at the past, there has never been a correction that has not proven to be a good buying opportunity. It has taken an average of less than three months for the market to make up those corrections, which is why most veterans plan to ride out the bumps.

When the market begins its return to normalcy, you don’t want to be on the sidelines. The secret to wealth has always been to “buy when there’s blood running in the street and sell when everyone is pounding at your door, clawing to own your equities.” You must have enough faith in yourself to buy when the rest of the market is selling.

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Since it is not always clear exactly when the recovery officially begins except as a matter of historical record, most investors play it safe and stick with good, solid companies – even adding to their holdings if it seems prudent.

Remember, just because you follow the majority of people, doesn’t mean the majority of people aren’t wrong. That’s why 85% of investors aren’t driving a BMW or living in high rise areas. Base your decisions on analysis and value and you will, more often than not, come out ahead.

For investors with a long window, this is usually not a problem. However, if you are closing in on retirement or facing some other financial need, these market swells can be devastating.

A well-balanced portfolio with a proper asset allocation for your financial needs and risk tolerance is still the best defense against the daily market swings. Amid all of the uncertainty, there is one indisputable fact that reads equally well in either market direction: there has never been a correction/rally that has not succumbed to the next rally/correction…..

Now you will just not have any idea of how apt that statement is unless you’ve actually read Cosmopolitan (really read it, not just look at the pictures) but I like to believe that fund investors who read Mutual Fund Insight are very different from those who don’t. I have believed so far that there are two kinds of fund investors-thinking ones and non-thinking ones. And those who invest their time and money in reading this magazine must be the thinking ones.

What distinguishes the two? The non-thinking ones are the ones who just follow whatever seems to be the flavor of the day. The thinking ones are those who carefully weigh their options, consider the facts and then take rational decisions. However, in recent months I have seen that sometimes, the final step is the same.

The non-thinking ones unthinkingly follow the flavor of the day. The thinking ones think carefully, then just ignore the conclusions and follow the flavor of the day. They look at returns, ratings, portfolio statistics and whatnot, but then turn around and invest purely driven by the fear of getting left behind by everyone else.

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Non-thinking and non-knowledgeable investors have many reasons for investing. These are normally the ‘it’s available at par’ category of reasons that even a mildly knowledgeable investor should just laugh at. But the funny thing is that knowledgeable investors are investing not for laughable reasons but for no reason at all.

I’d like to tell these people, forget about learning more about investing you probably know enough already. What you don’t know is about your own psychology as an investor. The fear of not doing what everyone else is doing coupled with high pressure marketing appears to have overcome their rational thought. What is worse is that like all irrationality, this too seems to get drastically magnified by high stock prices.

All of which appears to be building up to a situation where investors will put in a lot of new money into mutual funds with expectations that are so high that they cannot be met.

The die is, well and truly, cast.

Some people avoid the stock market because “it’s too risky.” But it can be riskier to not invest. If you put all your savings under your mattress, it probably won’t be enough to sustain you in retirement. If it’s all in a bank account earning 3% per year, on average, then that will barely keep up with inflation, at most. You can do better than that.

Many reasons for many people to do investments, one that can be very common to most of us is to make money. There are also personal reasons that you’ll want to start or join an investment club. You’ll finally have the opportunity to play the stock market in a safe environment that may be low risk and lets you learn more about a subject that greatly interests you.
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Now firstly it is important to mention that what I write in this article should not be seen as advice, it is merely my opinion on the subject of investing on the stock market. I am fifty-three years of age and I have a long term strategy when it comes to investments. Over the shorter term of, lets say one to three years, the stock market may not prove to be that profitable, if at all. For this reason this type of investment may not be suitable for some people who are over the age of sixty.

Over a period of five to ten years I have a great deal of confidence that the stock market will out perform any type of growth that you could find from putting your money into a deposit type account. These are the accounts that you might find offered by a bank or building society.

There are a vast number of options open to you, these will be dependent on your overall attitude to risk. For the really daring investor, someone who is willing to put their money into a high risk investment, you could be looking at investing in the shares of a single company. This could be a company on the Dow Jones or one from the FTSE 100, for example.

I personally like to invest monthly into stocks and shares. This smooths out the peaks and troughs of the stock market, this is something which is known in the industry as pound cost averaging.

I have made money from stocks and shares over the last thirty years and believe that I will continue to do so in the future. I hope you will too!

Something similar has been happening for stock investors as well. Even though there were some stocks that lost money, an overwhelming number of them went up by huge margins. There isn’t really any stock or mutual fund investor out there who didn’t make a great deal of money. Therefore, what we have here is like an examination which everyone clears because the passing marks have been reduced to zero.

These are abnormal times which are very dangerous precisely because it’s impossible to make mistakes. You can invest in bad companies and bad funds and still make money. And that means that when the going gets even slightly tougher, a lot of people will find that they actually did invest in bad companies and in bad funds.

It’s an old saying that more investment mistakes are made in good times than in bad times and since the times are so good right now, the potential for making mistakes is that much higher. Investment markets change direction very quickly. Nothing prevents what look like good investments today from turning out to be bad ones.

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A large part of the money that is being invested by individual small and medium investors is in response to an active sales effort by mutual funds, portfolio managers and insurance companies. Investors are not going out, doing their own knowledge gathering and then choosing. Rather, there is a high pressure sales effort which is finding easy converts because the rise of the stock markets.

Unfortunately, this is leading to most investment going into those investments which bring the maximum profit to the salesman, rather than to the one most suitable for the customer. In mutual funds, almost all new money is going into new funds which do not have a track record rather than to tried and tested ones. The reason is that fund companies are allowed to take out five per cent of the money collected as marketing expenses. Since this can’t be done with older funds, companies find it profitable to continuously launch new funds that are just minor variations of ones. The salesman who sells you mutual funds could possibly be making five times the normal amount for selling a new fund. No wonder his ‘advice’ is always for buying new funds.

Paradoxically, these are great times for investors but they are also the times that demand the greatest caution. The hype is so loud and so convincing that it takes a very cool and balanced head to make the right decisions.

It’s good to be confident, or so all of us were told when we were young. Confidence will make whatever you want achievable. So it must be very good that I’ve been meeting a lot of very confident investors these days. I met a man who started investing in stocks only three months ago and whose investments have returned more than 25 per cent during this period. That’s an annualized return of more than a 100 per cent a year, as he proudly-and accurately-informed me. Someone else I ran into started investing in February 2004 and have more than doubled his money. He has made a very confident projection that showed how fabulously rich he was likely to be in about five years’ time.

Of course, this is not just amateur hour-professional investors too are sounding like the gentlemen above. I met the marketing chief of a mutual fund company who had many megabytes of marvelously entertaining PowerPoint slides about how his fund managers had generated great returns over the last three years. I did ask him about what their returns had been like before that but the response I got made me feel that I had said something very rude.

Welcome to the land of investing geniuses, no one in this world has made any mistake on the stock market for as long as they can remember.

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This is dangerous territory. It is a fact that investment decisions made during bull-runs result in eventual disaster far more than those made when the markets are down in the dumps. This is basic psychology. Most human beings are inherently optimistic. When the markets are rising, almost every one of us likes to believe that we are making money because of our savvy decision-making.

As long as the going is good-and the going can sometimes stay good for years-almost any investment does make money. However, by the time the stage comes when millions of occasional investors are being pulled into the markets like moths to a flame, all the safe money has already been made. There was a time when there were great stocks available at value prices, but that is no longer true. There is probably still money to be made in the current cycle of the stock markets but getting this money from someone else’s bank account into your own will involve buying high and selling even higher later.

Buying low to sell higher, which allows you the luxury of buying low to sell low if things go wrong are no longer possible. As the well-known theory states, you now need to buy like a fool and hope for a bigger fool to come along later.

Does this mean that you shouldn’t invest anymore? No it doesn’t. What it does mean is that most of the stocks that the newly minted geniuses are buying are those that are being talked up by smart operators who have found bigger fools.

This is a time for caution. A time when any good investor is as mindful of his own psychological responses to the sight of others making money as he is of the moves of the market.

The worst real losses are those of investors who got attracted to the stock markets around the time when the markets were booming. Typically, these people have made a series of bad choices. Instead of investing steadily, they have put in large chunks of money at one go. Their mutual fund investments are in untested new funds and their stock investments are in rumor-of-the-day type of stocks that were being pushed by brokers. The more recklessly adventurous have already lost large chunks of their investments to repeated margin calls from brokers and lenders.

Of course, the question that everyone is asking is when will the markets turn upwards and resume what we’ve come to believe is their normal course. After all, as the logic goes, there is nothing wrong with fundamentals. Firstly, the fundamentals corporate’ financial future are somewhat less rosy than the general hype would have us believe. The rising cost of money and distortions produced by the huge liquidity glut are a serious issue.

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Even more important (at least for the time being) is the fact that the markets’ short-term movements have almost nothing to do with fundamentals and almost everything to do with investor psychology and behavior. When large cap indices used to leap up by three or four or even five per cent in a matter of hours, that had nothing to do with fundamentals.

There was a huge optimism in the air, a kind of madness that made otherwise sane people want to believe that it could go on and on. Today, when the same indices collapse by the same huge percentages in hours, then it is as much psychology and behavioral factors at play as they were a month ago.

Unfortunately, this means that there is no formula for predicting when the decline will end. I don’t know what the Sensex level will be when it starts rising again, but in terms of time, I have a feeling that it is likelier to be measured in months rather than days or weeks. The cycle of optimism, alarm, fear, pessimism and then optimism again will have to be gone through. No matter what the numbers say, people’s feelings take time to change.

The coming months are a great long-term buying opportunity if you avoid making the wrong choices. So what is to be done? The answer is the same as it always is. You will do your financial health a big favor by steadily investing in a small number of well-chosen stocks or mutual funds.

Remember how, just the other day, you were thinking of the enormous amount of money you could have made had you been sensible enough to buy when the markets were down in the dumps? Cheer up, here comes that opportunity again.