Investing in a Down Economy

With the current economic climate, we've all been reconsidering our investments. And you're probably unsure about where to put your money now.

What happened: People have received their 2008 year end investment statements and are upset about how much wealth they've lost. Every asset class was hit hard. Losses of 50% in US Equities, 35% in Housing, 35% in Commercial Real Estate mean $20 trillion of losses were suffered. The economy is in a recession and the media makes things worse.

How are people feeling: Investors are disillusioned. Many are worried. They feel their advice may be misguided. Many advisors were far too optimistic about the economic and market prospects a year ago. In addition, there has been significant upheaval in the advisor marketplace as a result of the flurry of financial institution takeovers and rescues. As a result, many advisors have been distracted from paying appropriate attention to their clients and their investment portfolios. We're seeing survey evidence that suggests that a vast majority of clients are not satisfied with the quality of their investment advice right now.

What should investors do now: Many are taking one of three courses of action. First, fear is putting people on the sidelines in Cash or CD's. They want to avoid all risk. Money Market Fund balances are up 25%. Second, other's are opting to become independent investors. Self-directed brokerage account openings are up significantly. The 90's Technology bubble and the Day Trading craze of just a few years back tell us many won't do the research needed to be successful with results long term. The third group doesn't know what to do and their attitude is to wait until things rebound and prices come back to where they were before. If the hope strategy wasn't working before, are they confident it will work in the future?