TIMING THE MARKET.

Is The Long-Anticipated Correction Finally Here? The market lost about 5% last week; however, I have little faith in my ability to get in and out of the market at the appropriate time. As a result, I may make a few adustments but I will always be allotting some of my investment capital to the stock market. There are numerous examples that show most investors "shoot themselves in the foot" when they try to get out of the market to avoid a downward correction. As an example, consider a recent article in the AAII Journal where they published a list of 15 mutual funds that returned from 10.1 to 19.2% per year over the past ten years. When they looked at the average returns received by the average investor in these funds, none of these produced a positive return for their investors. The problem is that most folks make investments around market peaks and get discouraged and pull their money out after a downward correction. We observed this same behavior from some clients during the recent severe market sell-off of the past 2 years.



One investment principle I always follow is never to buy a stock just because the price went up and never sell just because the price went down. There are many reasons to buy or sell a stock but reacting to price fluctuations never seems to work for me. In a sentence, my philosophy can be summarized as: Buy good companies that offer me an opportunity to start receiving a return on my investment right away. For example, over the past18 months I have accumulated 2000 shares of AT&T at an average price of 30.77. Today, the stock sells for around $25.39. If I sold the stock today, I would have a loss of more than $10,000. While there is no way to put a positive spin on this, one bright spot is that I have generated $6,500 in option premiums and $2,440 in dividends during this holding period. This cash flow, coupled with the fact that I still own 2000 shares of a good company, allows me to sleep at night.

Still Not Getting Around Too Well. Although my back is considerably improved, I still am limited in my mobility. I can get around the house and yard; however, I don't have the courage to navigate the airport and fly to Denver. I will keep you informed as to what my travel plans are.