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What Do You Invest in When the Dow Jones Really Stinks?


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Today's economic outlook seems no better than the current headlines. The “mortgage crunch" is rippling through the banking industry like locusts. Interest rates are uncertain and energy costs are rising. Sounds depressing doesn't it?

However, those feelings could have been expressed by the citizens of England in the 30's, Germany or Italy in the 40's and the Americans in the 50's, 60's and 70's. You could also track similar or worse attitudes from much of the world at one point or another. Almost all of those economies recovered and many grew significantly.

As an investor, you need to take one of two positions:

Do you think we are on the brink of global economic and political collapse?

If yes, buy gold coins, canned food and a big gun.

Or do you think that the world economies will continue in some form or fashion similar to the way they are now?

If yes, then you need to make a plan that is REASONABLE, FLEXIBLE and as LIQUID as possible.

It is important that you understand the terms in the way I will be using them. Reasonable means that you write out a plan that is not based upon “hot tips" or emotional “cliches". It does mean that your plan uses sound financial principles that are consistent with your goals.

The first step is to complete a review of your current assets and compare that “allocation" with your goals. If it is out of balance, develop a plan that converts your current portfolio to one that meets your goals. Putting this plan into writing helps you to remove the emotional factor. This plan should include a schedule for reviews. A plan that is reasonable is one that makes sense for YOU!

Flexible means that you consider as many options as possible for meeting your goals without too much risk. Risk is usually the defining issue. It is very hard to even beat taxes and inflation without some risk. However, proper asset allocation will help to manage and reduce the risk in a portfolio. Every investment has some type of risk. Risk can NOT be eliminated but it can be managed.

Liquidity is the ability to move from one type of investment to another. Typically, the more ‘liquid" the investment, the easier it is to move. In general, it also means the investment will be less volatile. This will usually mean a lower rate of return.

Most successful investors use a series of planned steps tied to objectives and goals. This can help you get through the times when the market stinks.

Dwight Declet is the owner of Pacific Retirement Planning. As a registered representative (stock broker) he works with business owners and their employees in planning for retirement. If you have specific questions or would like more information, he can be contacted at:


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