LEARNING FROM LOSING

It seems that the most meaningful lessons in life are not learned from those that win, but rather from those that lose. How is it that investors in the Great Depression lost 90% and more of their investments in a very short period of time? How did investors and day traders in the Dot Com era first make millions and then lose millions, netting to zero or less? The answer appears that these investors were taking undue risk without even knowing it! Investing is not gambling, not speculation nor a get rich scheme. Rather when done properly it is a get rich slowly scheme which preserves net worth and can work for anyone. From the past it appears clear to me that for investors to be successful, they need to take careful calculated risk in order to get a reasonable (probably not flashy) return.

One of the keys in investing is to be invested when the market turns up. For most investors the last three months have been exactly this. For the three months ended October 31, the average diversified funds rose 4.1%, with much of this rise in October. It is interesting that the Dow Jones average fell 1.1% in the same period; most of the gains were in smaller or more specialized holdings. On the plus side, international funds rose 8%, precious metals 19% and real estate funds 12% in these three months. These funds tend to do better when times are uncertain and the future is cloudy.

So what lies ahead? Since November 1 st the Nasdaq has risen 5% with the post election bump. However, going forward, one can look to rising energy prices, troubles in Iraq, patchwork economic news and the possibility of rising interest rates to potentially dampen the economy. On the other hand, businesses are running leaner, unemployment is under control and inflation is negligible, all pointing toward positive results. Once again, I believe that the best solution is a broadly diversified portfolio, reflecting your personal situation and outlook to provide an investment portfolio that makes sense for you.

From all of us at Werner & Co., PLLC., we wish you the very best going into the holiday season and look forward to a prosperous New Year!

Sincerely,

Roger D. Werner