- My Early Beginnings in the Stock Market
- My Investment Experience Spans Over 50 Years
- The Purpose of This Book
- Managing Your Financial Affairs Is Critical
This chapter is from the book
This chapter is from the book
This chapter is from the book
Managing Your Financial Affairs Is Critical
You might be very upset and financially less well off than you were in early 2000, based on the stock market’s performance over the past ten years, or even over just the past two years. This is quite understandable. With one financial mess after another, culminating in one of the worst global financial and banking crises since the 1929 depression that resulted in a bust of the housing, credit, and stock markets, the past decade has been horrific. The question is what steps you are going to take now to minimize your risk of potential substantial losses when the next financial meltdown or stock market crash occurs. It eventually will come—although we don’t know when. We do know, based on history, that bear markets will come like clockwork to clean out your accounts, again and again. And stock market crashes arrive every 20 or 30 years, so being forewarned is being forearmed.
There is one approach that you can use that is very simple to implement: do nothing different and hope for the best. That is what most buy-and-holders do. A smarter approach is to make plans to better manage your finances and investments going forward. This book focuses on your investments. But you need to make sure that you review all aspects of your current financial situation and take the appropriate steps to put your house in order, if you have not done so already. That means budgeting; cutting expenses; saving more money; and having a will, healthcare proxy, power of attorney, and proper amount of life, health, disability, and long-term care insurance, if you can afford to pay all the premiums. And, if you have children or grandkids, make sure that you help them understand the importance of properly managing their financial matters—whether they are 8 years old, 18 years old, or older. Unfortunately, as the most recent surveys have shown, the financial literacy of our citizens is poor. And this problem needs to be urgently addressed at the public school level and beyond.
Because no one can predict where the stock market is going, why waste your money and time paying someone or some firm to baby-sit your money? More than a few top mutual fund managers have been embarrassed and humbled by the whipping their funds took in this latest bear market (for example, fund manager Bill Miller of Legg Mason Value Trust and fund manager Ronald H. Muhlenkamp of Muhlenkamp Fund, among others). And the big Ivy League endowment funds with their cadre of highly paid staff had negative performance as well.
Benefits of Managing Your Own Investments
As this book suggests, you need to immediately take control of your own investments. To help you do that, it provides a step-by-step investing approach. Here are five benefits of going this route:
- No need to subscribe to investment newsletters, magazines, or Web sites or to listen to stock tips.
- No need to listen to financial TV and radio shows to get guru recommendations.
- No need to buy load mutual funds from brokers or advisors or even no-load funds with their annual internal costs eating into performance.
- No need to buy risky individual stocks (probably after spending countless hours selecting and monitoring them or just following a guru’s tip).
- No need to pay advisors 1% to 1.5% a year to manage your money. That fee eats into your performance and can amount to tens of thousands of dollars over 10 or 20 years.
Moreover, you can do the following:
- Use ETFs as your investment vehicle of choice.
- Use a low-cost discount broker to execute your trades for less than $10 each and obtain free use of their portfolio management, charting, and technical indicator software platform.
- Alter your portfolio when the market trend changes from bullish to bearish, and vice versa.
- Use the tools provided in this book to manage your investments.
- Feel confident of your ability to protect your principal even in bear markets, and sleep better at night.
After reading this book, please e-mail me your thoughts, comments, criticisms, and questions, and I’ll respond. I can be reached at lesmasonson@yahoo.com. Please use the subject line “Comment on Book” in your e-mail so that I know it is not spam. I have also set up a Web site at www.buydonthold.com for additional information on the strategy presented here. If you enjoyed this book, please recommend it to friends, family members, and co-workers. The more individuals who are exposed to the approach delineated in this book, the higher the probability that they can preserve and grow their money. Be careful, be a smart investor, and be your own investment advisor. That’s one way you can win the investing game.
Leslie N. Masonson
Monroe, New York
December 2009