I have studied the stock market for twenty-one years. I began investing in mutual funds in 1987. Slowly, while learning about investing, I progressed from mutual funds to stocks. Then in 2004 I completed an MBA from USC with the goal of becoming a mutual fund manager or portfolio manager. For the last four calendar years, 2004 through 2007, my personal portfolio has averaged a rate of return more than double that of the overall stock market. But I achieved this with a great amount of work, risk, stress, and frustration. And frankly, I believe the good times are over.
I believe that we are headed into the most difficult time in the history of the stock market. The credit liquidity crisis that that is unfolding right now is causing chaos, and when all the financial engineering finally unwinds, the effect is going to be more profound than we expect. This scares me greatly. Here is a quote from an article about CDOs:
(Satyajit Das). . . is not sure if it will play out like the 13-year decline of 90% in Japan from 1990 to 2003 that followed the bursting of a credit bubble there, or like the 15-year flat spot in the U. S. market from 1960 to 1975. But either way, he foresees hard times as an optimistic era of too much liquidity, too much leverage and too much financial engineering slowly and inevitably deflates.
Unless you are proficient in shorting stocks, or in using option strangles, or other risk mitigation techniques, and this is not the average investor, I believe it would be prudent to get out and stay out of the stock market entirely. My expertise is in the U. S. stock market, but since the economies, and stock markets, of the world are so interrelated, this advice could, and perhaps should, be extended to other stock markets as well.
I recently received an email from my broker urging me to contribute to my IRA. They included a little graphic showing the benefit of investing. If you invest $4,000 per year in your IRA, at 8% ROR, for 35 years, you will have about $744,000. But when you retire, and shift this into a safe Government security earning around 4%, you will only get about $1,984 per month after taxes. Does that sound like a great retirement to you? Try traveling the world on $1,984 per month. Moreover I don't think the stock market will achieve an 8% ROR going forward.
So what is the answer? What caused me, after twenty-one years, to run (not walk) away from the U. S. Stock Market? I discovered land banking. I will keep this short, as this article is really about the stock market, but I believe the best investment, bar none, is in pre-developed land in the path of growth of a major metropolitan city.
If you would like more information about this, please visit TwoPercentSecret.com
Wayne Zickefoose has an MBA from the University of Southern California (USC), has studied the stock market for 21 years, and is a Land Banking expert in the Southern California area. You may contact him at TwoPercentSecret.com