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Fasten Your Seatbelts. It's Going to Be A Bumpy Night!
Recently I watched an interview that Dick Cavett conducted in 1971 with that marvelous actress and personality, Bette Davis, and recalled this memorable line from "All About Eve."

In many ways it sums up the historical performance of the markets. At this writing, the Dow has reached an all-time high, having closed on October 4th at 11,866.69 or 10.72% year-to-date (source: The Wall Street Journal); this despite the continuing threat of terrorism, peak oil and nuclear rumblings from North Korea and Iran.

The housing market has slowed rather dramatically and those industries which serve it such as lumber, residential construction and that segment of the labor force are, in turn, adversely affected. The unemployment rate as reported in The Wall Street Journal, dipped in September to 4.6% from 4.7% in August. The Fed appears to be content with holding interest rates at their current level and there's even speculation that they could cut rates at the next FOMC meeting. The Administration, in anticipation of November's mid-term elections, touts a strong economy and I do believe that expansion will continue, albeit at a slower rate.

So what's an investor to do? Are we surfing the crest of a new bull market wave or are we headed for a wipe out (figuratively, of course)? Recalling the Bette Davis interview, she spoke of her success being in great part due to her discipline. The same should be true of investors. As long as your goals remain the same and you have a strategy that is designed to attain them, bumpy or smooth market ahead, you should be on the right track to success.

A client asked me the other day what I would think of his moving to the sidelines if the Dow (remember folks, only 30 stocks) were to slip below 11,000. That would be a drop of approximately 7.25%. My advice initially is not to do so.

Look at the chart .The likelihood of being out of the market on the 40 "best" days or 40 "worst" days is statistically nearly impossible, but if you were to miss the best, your return on investment would be dismally below the market as measured by the S&P 500. Conversely, were you to miss all of the worst days you'd beat it handsomely, and nicely, if you missed both best and worst. Rather, review your asset allocation and perhaps pare down your riskier equities and add fixed income to the mix. In any case, talk to your professional; he or she should be your "seatbelt."

 

Please Email bob@cfsias.com with your questions.
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INSIDE FINANCE will appear regularly, addressing financial matters of interest to our readers. Any questions? Email bob@cfsias.com

If you wish to review your investment portfolio, please contact me for a complimentary consultation: bob@cfsias.com 973-826-8800. Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member NASD/SIPC. Cambridge and CFS are not affiliated.

The preceding article is for informational purposes only and should not be used as the primary basis for an investment decision. Indices mentioned are unmanaged and cannot be invested into directly. Past performance does not guarantee future results. All examples given are hypothetical and do not reflect actual investments. There may be additional risks associated with international investing such as: currency risk, economic and political risk, and differences in accounting practices. Consult your advisor to consider your risk tolerance before investing internationally. The views expressed in this article are those of the author and are not necessarily those of Cambridge. Bob Jaffe is Managing Director of CFS Investment Advisory Services, LLC in Totowa and has been a Clifton resident since 1984. Active in community affairs, Bob is Past Board Chairman of the North Jersey Regional Chamber of Commerce and president of its foundation board. He serves as a commissioner on the Clifton Rent Leveling Board and is President of the Clifton Rotary Club. Representatives of Cambridge do not offer tax or legal advice. Consult a professional for your personal situation.

 




 
 





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