History offers investing lesson


Unsure about the economy and how it could affect your wealth? If so, history could hold some of the answers. And we’re not talking ancient history.

Citing Yogi Berra’s famous statement "It’s deja vous all over again," a white paper prepared by the Zeigler Companies notes similarities to today’s economy and that of the early 1970s – all with lessons for today’s investor.
"With a presidential election in question, the S&P 500 off by more than 45%, unrest in the Middle East, a nasty business downturn in progress, and a loss of faith in America’s institutions, these are tough times for investors," reads the introduction to the report. "Or are they? In fact, those were tough times, because they all happened in the bear market of 1973-74," the paper states.
The paper, entitled "We’ve Been Here Before" and written by Ziegler’s chief financial officer, Gary Engle, outlines six key questions every investor should consider in today’s market and how to apply lessons learned from bear markets of the past.
"The art of investing is not quite so simple as we once thought", said Engle. "During bull markets, it’s easy to make money, but bear markets require perseverance and a view of what will work in the long haul."
A look at recent bear markets, back to the 1970s, offers several lessons for investors, the paper notes. Among those:
Lesson 1: Panic selling was a
big mistake.
Lesson 2: Diversification was critical. (A well-diversified equity portfolio might have 30 different stocks from multiple industries, the report also suggests.)
Lesson 3: It was a great time to invest in equities.
Lesson 4: Consistent investing could have shortened the pain and enhanced the rewards.

When all is said and done, it really comes down to two questions, the report says: "Is my nest egg gone?" and "Will I be able to retire – comfortably?"
The paper offers six questions that investors should consider to properly answer those questions:
1)What are my investment objectives? You need details to set objectives.
2)Are my objectives reasonable? Unreasonable expectations will cause a plan to fail.
3)What is my risk tolerance? The current down market is a good time to assess how risk-averse or risk-comfortable you are.
4)How sound is my portfolio’s structure? Is it balanced or does it require rebalancing?
5)Do I save and invest enough money? If you are not on target to fund your retirement, it will cost you less per month if you start now than if you wait.
6)Am I missing any opportunities? Even in the worst of times, the market presents opportunities.

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The paper is available at Ziegler.com or through Ziegler investment consultants.

Sept. 27, 2002 Small Business Times, Milwaukee

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