http://nofieiman.com/2009/02/deciding-when-to-invest/
Deciding When to Invest February 5th, 2009 | Investment Earlier this week I received a number of questions from readers. They were asking quite similar questions whether it is the right time to top-up their investment in either stocks or mutual funds. As Warren Buffet said, "Be fearful when others are greedy and greedy when others are fearful." One or two years ago, we were very fearful when others are very greedy. But today, others are fearful yet we have not turned greedy. I should clarify that to be a successful investor, you have to look beyond the conventional realm of the financial markets in today's economic climate. First, being contrarian does not always mean taking an opposite direction on the same road-sometimes it just means taking a different road. Secondly, there is a difference between a contrarian and a reverse conformist. A contrarian is not someone who is blindly take an opposite position of the crowd indiscriminately. It also should be noted that there is one major difference between us-regular "Joe Average" investor-and Warren Buffett. We can only think of investments in the context of a financial market, but for Buffett it may mean investing outside the financial system. He has a lot of money and influence to cut deals in order to secure entire business outright. Many of these businesses are simply inaccessible from the stock market. Although Buffett is one of the globe's wisest investor, he is not always good at everything. He has never experienced the Great Depression or hyperinflation period. The world today is at a turning point and certainly there is no guarantee that it will return to the world that Buffett experienced all his life. Indeed, I admire him as an exceptionally astute businessman, a legendary investor, and a great philanthropist. But "copy-paste" his perspective into the general is a dangerous trap to base one's investment decisions on. If you just follow Buffett's way as is, it might put you at a severe disadvantage. I would love to see a strong rally although I don't think it will happen in a month or two. At this moment, everyone is sitting on their hands until they see everyone else move first. Unfortunately, no one knows what the trigger will be. Quoting Marc Faber, financial institutions are sitting on huge piles of cash as they sell their assets and hoard it. It is probably only a matter of time before there's a positive trigger. I believe there will be an Obama rally which will stimulate the U.S. economy which in turn will stimulate our stock market as well. We're preparing for a massive country-wide election in 2009 that if run smoothly will also stimulate our economy. However, in the mean time, we will have a bumpy ride with the stock market having good days and bad days. My investment strategy during this crisis period is simply liquidate and wait. The idea is fairly straight forward. First, you've got to ask yourself what you think the aftermath of this crisis will be. If you believe that hyperinflation will occur just like in the great crash of 1929, then it is a priority to accumulate gold-or buy ETF gold and gold mining stocks. If you believe that this crisis is temporary, you might want to buy cheap stocks from invulnerable sectors such as consumer goods. The next step of this strategy is to liquidate a portion of your assets and wait for the crash. If you had already identified the second step after this crisis, then it's time to buy up the assets. Again, this strategy is not perfect. The financial crisis may take quite a long while to arrive. Keeping your assets in the form of fiat money will mean that they will lose their value through the ravages of monetary inflation in the meantime. I don't know whether this strategy to be good or bad because it will depend on one's personality, risk-tolerance, and personal circumstances. However, if you are the sort who is particularly risk-adverse, perhaps this strategy may be suitable for you. Using this strategy allow me to minimize losses while reaping the benefit of capital gain and stock dividend at the same time. Credits for Mr. Nofie Iman great posting Regards, Yudizz
