Stay the Course and Look for Opportunity

• It is easy to be an "investor" when your account continuously increases on a regular monthly and quarterly basis. Obviously, being an "investor" from October 2007 to now is not quite so pleasant. June was "scary" for almost everybody.
• I like to say that the price you pay for long term growth in your portfolio is having to experience these downturns. Sometimes they last for months...sometimes for years.
• Warren Buffet has supposedly stated "Occasional outbreaks of ...fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable, both in duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and greedy when others are fearful." The VIX still below its highs notwithstanding, there is a lot of fear out there. For those that have cash on the sidelines, clearly it is near the time to become greedy! (Keep in mind that every day we have the chance to buy, sell or hold. Staying the course is essentially the same as buying your existing portfolio.)
• In any case, this is not the time to be liquidating and probably not even the time to be sitting on the sidelines except...Be sure you have enough cash and income to "ride out the storm" without selling good investments at the wrong time. Enough in today's environment is enough for the next 3-5 years.
• If we are to learn from history, it is probably useful to revisit the early 1970's. (A serious oil "price shock" occured then, like we are now having. Except then, we had to wait in lines to get gasoline. This was when the 55 mph speed limit was imposed.) Serious long term investors, even buying at the peak before the downturn were rewarded for staying the course and owning good quality investments. But, the duration of the "storm" starting in January 1973 was three years. The S&P500 fell from 119 in January to 97 in November 1973 and then to 64 in September 1974, rising back to around 100 in January 1976. By January 1983, ten years from the previous peak, the S&P500 had risen to 145.
• A good quality investment, here defined for discussion purposes as American Funds Income Fund of America, a mix of dividend paying stocks and good quality bonds (AMECX) turned in a better performance: $100,000 (Net Asset Value) on November 30, 1973 weathered the two to three year storm, falling to $94,000 at the end of 1974 and rising above $100,000 in 1975. By January 1983, after all dividends were reinvested for the ten year period, the $100,000 had grown to around $322,000. (According to American Funds Hypothetical-do not invest before reading the prospectus, reviewing all required disclosures, and meeting with a qualifed Financial Advisor. Be sure that your risk tolerance and complete financial situation is reviewed to determine that any investment is suitable for you.)
• Another possible good quality investment (here again defined for discussion purposes) would be American Funds American Mutual Fund, a diversified stock mutual fund. (AMRMX) A purchase of $100,000 at near the peak of the market around the begining of January 1973, after the 3.5% sales charge leaving $96,500, fell to $72,000 by the end of 1974. The investment, with dividends reinvested rose to $322,000 by January 1983. (Again according to American Funds Hypothetical-do not invest before reading the prospectus, reviewing all required disclosures, and meeting with a qualified Financial Advisor. Be sure your risk tolerance and complete financial situation is reviewed to determine that any investment is suitable for you.)
• The index fell 34%, and gained a total of 49% in ten years. (97 to 64 to 145) AMRMX and AMECX fell less, and gained 322% in 10 years. (AMRMX: 100 to 72 to 322- Jan '73 to Jan '83 and AMECX: 100 to 94 to 322- Nov '73 to Jan '83). Keep in mind, history and past performance do not predict the future. This is not a recommendation of AMRMX or AMECX. It is an illustration (for discussion purposes) of how money can be made, even if the stock market does not go up very much by investing in good quality investments with the help of professional management.
• Experienced investors are only fearful when markets are too high and when everybody seems greedy. Experienced investors see market drops, dips, corrections and bear markets as opportunities.
• When you are in the middle of a downdraft, like now, there will be no shortage of "Doom and Gloom" and claims or fears that "This time it's different". The 1970's were scary. 1987 was scary. 2002 was scary. Yet, the markets recovered in each case.
• In closing, investing is not about what happens in 1 year or 3 years. Investing is more about what happens over 10 years. Be sure you have cash and/or income so that you can Stay the Course and Look for Opportunity.

See http://www.waynestrout.com/ for more complete info: Investment advisory services are offered by WS Wealth Managers, Inc., an investment adviser registered with the SEC. Wayne Strout is an Investment Adviser Representative with WS Wealth Managers Inc. in addition to serving as President/CEO and Chief Compliance Officer of the firm. Scott Sebring is an Investment Adviser Representative and Vice President. WS Wealth Managers Inc. is not affiliated with Glen Eagle Advisors LLC or Pershing LLC. Wayne Strout and Scott Sebring, dba WS Wealth Managers. Securities offered thru Glen Eagle Advisors LLC, Member of FINRA And SIPC, with clearing thru Pershing LLC, Division of Bank of New York Mellon Corporation, also Member of FINRA and SIPC.