Look at where your account is today compared with what you had at the beginning. Don’t count what you have added during that time or interest income. Most folks are still running a loss.
Your broker, if you are unlucky enough to have one, will assure you that the market always comes back and you are in for the long haul. So don’t worry, be happy.
If you were one of the few (about 1%) who had a broker or financial planner that actually knew how to protect your money you would not have lost a huge portion of your portfolio from 2000 to 2003.
So, you have to learn to protect yourself! It is a lot easier than you think and most brokers are not even aware of it.
It was time to buy. Divide the portfolio into 10 equal parts. Select 10 mutual funds that have quit going down and are now going up and buy these. This doesn’t have to be done all in one day. Spread it out over the next 2 or 3 months as good equities present themselves.
Here is the key. Don’t lose money. Laugh out loud, thats what you do. Place a 10% stop loss order on each fund that was purchased and as each fund advances raise the stop every month. The investor has 10 separate positions with a 10% risk on each one. If the selection of the fund was poor and it goes down instead of up the loss is one percent (1%) of the total portfolio.
The investor has been smart enough to diversify into several sectors so the chance of losing in all 10 positions is very small. Do not buy individual stocks. Few investors are capable of choosing company stocks. Let the mutual fund manager do that. As stops are hit, find other good equities that are going up. When the market turns down you will be in cash as you will have been stopped out of all positions with nice profits.
Brokers don’t know much more that you do (and I’m not kidding). This simple strategy will spread risk, prevent large initial losses and prevent giving back profits as they are made.