Let’s be truthful. It would be a gross understatement to say it has been a nerve-wracking experience for private investors and fund managers, who have been desperately trying to manage their portfolios through a worldwide credit crunch, a Bear market, the global financial crisis, the worst labor market since the 1930s, bank bailouts, the collapse of the housing market; and an unprecedented monetary easing by the central banks. However, investors take note. There are signs that the economy is steadily improving, and now is a great time to reflect on the investing lessons that have been learned over the past five-plus, turbulent years.
Many investors believe that the inherent riskiness of financial assets was either downplayed or not properly disclosed, during the great Bull Market from 1983 to 2000. Nevertheless, after two Bear Markets in less than a decade, investors do not need to be reminded that markets can go down; as well as up. Nowadays, investors are seeking alternatives to poorly performing traditional investments that will preserve/protect their investment principle. Make no mistake. Many of the same uncertain investors would be happy to be buy additional shares in their favorite holdings, if they firmly believed it would appreciate in the fastest possible time. However, what investors are faced with today in stock market investing is that tried and true investing strategies no longer work, and instead, investment seekers are left with pure speculation.
The problem with speculating though, is that it combines both trading and investing without having a point of view, other than an underlying hope that a stock will go up. Flipping an IPO is an example of strong speculation investing. It may work on occasion but, more often than not, the values are not sustainable. On the other hand, some of the alternatives for confused investors, like investing in hard assets and profitable business ventures, have demonstrated that they are much more transparent and reliable. Furthermore, the decision to invest in a particular investment, should only be made after thorough investment research and careful consideration. Essentially, it comes down to education versus speculation.