Nemo’s 2008 Inve$tment Guide

Nemo’s 2008 Inve$tment Guide

THE FOLLOWING IS NOT a professional recommendation or specific investment advice. THE FOLLOWING IS a general discussion, without any direct or implied professional or other services offered. ALL INVESTING IS risky and unpredictable. THIS ARTICLE DOES attempt to help you understand and prepare for some of those risks.

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The financial and business health of the United States is far along a muddy pathway to the dismal swamp of a recession. This is not good for any of us. Recessions are bad for investors and non-investors.

If you won’t have any money to invest during 2008, stop reading this article now. Go for a walk, listen to some music, read a book, or enjoy yourself doing an activity that doesn’t cost you or anyone else much money. That habit will serve you very well during a recession.

If you are an active or potential investor on a small or medium scale, you’ll have multiple choices in 2008:

1 = Do nothing different. Keep your money where it is now, and continue to invest as you have been.

2 = Sell into a loss. Identify your worst investments and sell them to avoid losing more money than you already have done.

3 = Buy on sale. Choose valid investments that have come down in price, and make new purchases.

4 = Consider cash to be king. Add to your money market account to stabilize your portfolio and stay safely away from potential market declines.

5 = Combo strategy. Jumpstart your brain into high gear either on your own or with an experienced advisor, and prepare your own hybrid plan based on some or all of the previous four courses of action.

Then you’ll have to decide between one of the following:

A = Switcheroo. Hop around from one strategy to another until you are confused, disoriented, and out of touch with financial reality.

B = Hold fast. Stick with your well-considered plan until you have a strong reason to change direction or shift gears.

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Here is an example of a three-step real-world strategy you may want to consider:

V1 = Consolidate all available cash assets in a top-rated, low-cost, high-yield retail money market account, such as Vanguard Prime Money Market Fund (symbol: VMMXX).

V2 = Every time your portfolio net value or the overall market averages decline by ten percent, shift ten percent of your money market assets into one or more of the following four no load stock index mutual funds, that between them represent almost the entire spectrum of (we hope!) quality domestic (U.S.) and international corporations:

Vanguard Total Stock Market Index Fund (VTSMX)

Vanguard Extended Market Index Fund (VEXMX)

Vanguard Developed Markets Index Fund (VDMIX)

Vanguard Emerging Markets Stock Index Fund (VEIEX)

[You can learn about all Vanguard funds at http://www.vanguard.com. There is a SEARCH box upper right on its web pages, for looking up funds by symbol. Let me know if you have trouble finding these four suggested funds.]

V3 = Every time your portfolio net value or the overall market averages go up by ten percent, congratulate yourself on your brilliant investment strategy. Celebrate by buying a real asset with value that will yield quality of life dividends during good times and bad. Suggestions: technology, music, literature, clothing, books, automotive, furniture, or household.

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Two previous articles on sensible investing are:

https://www.mymac.com/showarticle.php?id=403

https://www.mymac.com/showarticle.php?do=something&id=1892

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During the past several years, the most worthwhile, consistent investment advice I’ve received has come from Ben Stein and Paul Lim in the Sunday Business section of the New York Times. You can read these columnists for free at http://www.nytimes.com, and locate their current and previous articles by searching for them by author’s name in the SEARCH box upper left on the Times’ web pages.

You can learn more (than you never wanted to know) about financial recessions at Wikipedia.org and a zillion other search sites, but you’ll know it when it happens to you and yours. On Wikipedia I just read a noteworthy quote: “Newspaper columnist Sidney J. Harris amusingly distinguished terms this way: a recession is when you lose your job; a depression is when I lose mine.”

May your life be full of success and pleasure, and I hope you can begin to recession-proof your financial assets, whether they are modest or massive.