TAILIEUCHUNG - Protecting Your Wealth in Good Times and Bad Chapter 3

Chapter 3 Investing for retirement usually means placing at least a portion of your money in the stock market. The reason is that, over long periods of time, it is highly probable that the returns from stocks will exceed the returns from most other asset classes, such as bonds and money market funds. | Chapter 3 Bear Markets and Bad Investor Behavior History shows that the biggest risk is not being in the market when it drops but being out when it rises. Jim Jorgensen I nvesting for retirement usually means placing at least a portion of your money in the stock market. The reason is that over long periods of time it is highly probable that the returns from stocks will exceed the returns from most other asset classes such as bonds and money market funds. In addition stocks provide a hedge against the erosion of principal caused by inflation and taxes. The extra gain expected from stocks is not without extra risk. There have been several periods when the market fell 20 or more in a short time and other periods when stocks did not outperform bonds or money market funds for a long time. When a deep bear market rolls around it is often a brutal test of an investor s nerves. Bear markets can be painful emotionally and financially. Individual investors have no control over the direction of the market. The only decision is to be in or out. When you are in and the stocks fall you lose money. When you are out and stocks rally you miss an opportunity. But losing money is only one of the Copyirght 2003 by The McGraw-Hill Companies Inc. Click Here for Terms of Use. 29 Protecting Your Wealth in Good Times and Bad issues. Bear markets can cause anxiety frustration sleepless nights a feeling of hopelessness and all kinds of uncomfortable side effects. Due to all the bad stuff a bear market can cause wouldn t it be wise to find a market expert who will magically get you out of bad markets and into good ones That is a nice dream but it is not reality. Market timing does not work. No one can predict the direction of the stock market with enough accuracy to make any money and if they could why should they sell their alchemy services to you Instead of trying to predict bear markets investors should simply be prepared for them. Successful investing hinges on the development of a .

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