The conventional wisdom on investing is that dips in the market provide excellent buying opportunities. This is, then, a particularly unconventional time. My list of “winners” right now consists of Piedmont Natural Gas (PNY-NYSE) and Fidelity Low-Priced Stock (FLPSX-NYSE). My list of losers includes, well, everything else.
Not to be overly pessimstic, but that is to say that had I taken all the money I’d saved over the years and stuffed it under my mattress I’d be better off to the tune of thousands of dollars. As a regular investor and a conservative one at that, I’ve nonetheless always been well-aware that when you invest in a stock you should be prepared for the possibility that your investment will lose 25 to 40 percent of its value. Right now I have plenty of cases where I’d love to have lost only 25 to 40 percent. I would hazard a guess that our overall portfolio is down about 45 to 48 percent.
Interestingly, my long-touted foreign diversification strategy has made almost no difference, at least in my case. Approximately 10% of my portfolio was shielded, but as this is a global economic crisis, my foreign investments suffered as much (or in some cases more) than my domestic holdings. I wasn’t wrong about a financial catastrophe coming, but my best guess as to how to avoid falling prey to it–get your money out of the US–proved insufficient. That’s obviously vexing, but in hindsight, I’m not sure what else I could have done short of just selling everything and holding cash.
My present plan, which I’d advocate to anyone, is to concentrate on de-leveraging, which is to say I’m aiming to be debt-free in the next 18 months. We don’t carry credit card balances (and neither should anyone else except in an emergency), so we’re working on eliminating the house and car payments. The house and car carry interest rates of 4.897% and 6.94% respectively. I can’t think of any other way to make that kind of guaranteed return right now.
After the loans are extinguished, I’ll reevaluate the stock market. I’m intrigued by something called TIPS, or Treasury Inflation-Protected Securities. Since I think we’re going to have massive inflation given all the money being pumped into the economy, this seems like a relatively safe play. I’m not crazy about bonds, but until this thing bottoms out I don’t have enough confidence in the market to buy more than one or two stocks.
Given that I’ve been a stock market investor almost the entirety of my adult life, that’s saying something.