Our Take

Burton Malkiel, professor emeritus of economics at Princeton University and acclaimed author of “A Random Walk Down Wall Street,” addressed this question on the opinion page of the Wall Street Journal today.  We recommend you read his entire column.  Some excerpts follow:

“I think not….I believe it would be a serious mistake for investors to panic and sell out.  There are several reasons for optimism.”

“First, I believe stocks today are cheap.”

“Moreover, the structure of U.S. corporate earnings increasingly reflects economic activity abroad…[which] is more important than the inability of Europe to get its house in order and the paralysis in the U.S. and Japan.”

“And for those who believe that the decline in the stock market reliably predicts a new recession, remember the famous dictum of the late economist Paul Samuelson: ‘The stock market has predicted nine of the last five recessions.’ “

“No one can tell you when the stock market will end its decline…. We have abundant evidence that the average investor tends to put money into the market at or near the top and tends to sell out during periods of extreme decline and volatility… the average investor has earned substantially less than the market return, in part from bad timing decisions. My advice for investors is to stay the course.”

For additional perspective, we recommend you read Larry Swedroe’s latest blog post,
"How Markets Have Responded to Past Sovereign Downgrades."   

The moment a person turns 62, one of his or her concerns is: “When should I file for Social Security?” Given the importance of Social Security benefits as a source of income for most retirees, it is critical to determine the most optimal way to file for benefits.

One of the most common questions at the beginning of the financial planning process from prospects in El Paso and elsewhere is: what are your favorite stock picks? Our response is that stock picking or market timing doesn’t work, and we’re backed by decades of research. However, the hype and noise of Wall Street keep trying to persuade investors by pouring millions of dollars a year in advertising to showcase their "super star" managers and their latest “hot” stock picks.  

Here’s further evidence that supports our belief that active management doesn’t work.

We just added two articles to our article library:

The Risks of Fixed Income Investing

Current State of the Municipal Bond Market

You may download them directly from our article library.

Weight loss and wise investing share a very important characteristic: they're simple, but not easy.

Let me explain.

Every year, Americans spend billions of dollars in weight-loss related products and services. Magazines that promote the new "secret Hollywood diet" fly off the shelves; strangely, people forget the last year "secret" diet in favor of the new one. "Diets" come and go, and products that promise to lose weight "without diet or exercise" are increasingly popular. People are willing to starve themselves to fit in a dress; if they succeed, they give their secrets to their friends, who will also buy the new miracle product. If they don't succeed, more than likely the blame will go to the product or to other outside factor.