money..

.. get back,
i'm all right jack keep your hands off of my stack..

'Money' - Pink Floyd

i don't want to comment much on the whole stock market fiasco from the last fortnight or so.. people don't believe my conspiracy theories anyways, but it is slightly fishy when the only people who walk away from all these crashes with their pockets bulging are the same people who make policies and decisions. is it just me who sees something amiss here?!

anyways, for people who have 401k and IRA accounts, you must be fretting and spending sleepless nights wondering if your mutual fund accounts are going to be decimated any more at this point. there are two concepts to keep in mind here:

1. Portfolio balancing act - depending on what stage of your life you are in, the mix between stocks, cash and bonds will vary. Cash and bonds are low risk, low return methods; stocks are high risk high return, and among stocks you have several sections: low, mid and high cap, foreign, growth, etc.
   
   The closer you get to retirement age the lesser chunk of your savings you want to be in stocks. What you have at this point is worth too many years of hard labor to risk frittering away in an attempt to gain a pittance.


2. Dollar-cost averaging - this refers to investing a fixed amount at regular intervals (e.g. monthly), regardless of market movements and, by doing so, more shares are purchased when security prices are low, and fewer shares are purchased when prices are high.
   
   This strategy is intended to moderate the volatility of a portfolio over time by minimizing one's exposure to the risk associated with investing a large sum of capital in one asset (or asset class) just prior to a sudden decline in the asset's value.

don't bother trying to predict the market's next upturn, or which stocks are going to rise tomorrow. what you want to look at is the bigger picture. emerging markets like china and india will slow down, but still have higher growth rates than the usa. russian markets will always be unstable. when investing in mutual funds, research as much as you can on the expense ratios, alpha, beta and r-squared values - these tell you whether the fund is flagrantly mismanaged or the account management knows what it's doing. remember, investment people have no obligation whatsoever to make money for you, even though you might be putting your entire life savings in his hands!

the stock market is cyclical, on a roughly five-year loop, but overall it will keep rising. it's hard to see that right now because we are at pretty much the lowest point of the cycle that started about 2002. so hang in there, read and ask questions. don't sit around passively thinking ol' uncle sam is going to save you. hold your local legislators accountable. ask them about their energy policies. ask them where they stand with subprime mortgages. your future is not in your hands now, you need to snatch it back.