Saturday, June 13, 2009

Would You Trust This Arrogant Nerd's Financial Advice?

Sometimes we Americans can allow our financial better judgment to be suspended by clever marketing, polished wall street analysts, and the seductive power of CNBC, CNNf, etc. It was not enough to endure the bubble from 1995-2001. Oh no, Americans listened to the same pinheads tell them to stay fully invested for the long term, and to diversify their portfolios over a wide variety of stock classes.

Those who fell for this nonsense are now paying the price for their misplaced trust.

I removed the greater portion of my stock holdings in 2007 in reaction to the felling of market overvalue. My reaction was private as I did not want to subject myself to the jeers of my peers. I have been vindicated, no doubt, by the market drop of 2008-2009.

The myth of "diversifying" over a wide variety of stock classes is not diversification AT ALL. I fell for this scam back in the late 1990's but then noticed that all stocks (even international ones) were highly correlated in trend. No variety of stock classes would have saved anyone in the current downturn!

My point of this piece is to urge you to spread your assets between US dollars in a reputable US credit union (not a bank); a Euro cash account in a country like Switzerland, Germany, or France; the US stock market (10 to 25 percent according to your time horizen); a municipal bond fund; and precious metals like gold and silver (via ETFs like GLD or SLV). This is the diversification.

I do believe we all should be dollar cost averaging into the US stock market at the present time, but we should be doing it moderately and with the intention to continue over the next several years.

US stocks will correct again and again. When the doom and gloom are heavy on CNBC, that is the time to take chunks of your wealth and bottom feed an S&P 500 or Wilshire 4500 fund. This is called contrarian investing and you will reap great rewards if you can purchase cheap shares when the pessimism is high.

Resist the nerds who want to be fully invested at all times so their fees can still be generated from your holdings. They are out for their interests, not yours. You've been warned.

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