Thursday, August 4, 2011

Portfolio Management:Leaning To Learning

Though we don't know what will happen tomorrow,we do know what happened today.We are not in a bear market,which is defined as a 20% drop or more;we are in a market correction.We are not in another recession,either;the economy is still growing,although slowly.Corporate earnings have been very good for Q2,with most firms exceeding estimates.These are the fundamental facts.Forget the knee-jerk hysteria of the sell programs that went off today.A good employment report or a supportive gesture from a central bank could set us back on the right track to a healthy market as soon as tomorrow morning.
Until that happens,we need not be sick ourselves because panic was in the financial streets on a given day.We are still the thoughtful people we were when we woke up on the morning of a sell-off.We know that,historically,those who run with the herd at such a time have always lost out in the end.
That doesn't mean it's time to buy.We could be headed for another bear market and recession.In that case,some buying on the way back up would be in order.It just isn't at that point yet.There's a lot to be said for just parking new money in cash for now until the situation is clarified over the next few days and weeks.It may not be exciting,but it is a durable plan.

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