From an investor point of view, we are definitely living very exciting moments and the next few years will produce huge investment and speculative opportunities if you are ready with the right mindset.
Let me explain how I see events developing. Even thought I am not bullish yet, I believe we have seen a bottom in the Dow (7.882 October the 10th 2008) and, even if this level is tested again, I do not think it will go much further down.
Regardless if you are bullish or bearish, one thing is sure, the markets will maintain a high level of volatility during the next few weeks or even months. So, be ready for it and make it work for you.
Initially, we are going to see a lot of pain in the form of defaults, bankruptcies, forced selling and unemployment and within a few months, inflation will pick up, as governments are furiously pumping in cash to revive international economies. These inflationary pressures could generate some spectacular movements in the market. In a few years, we could see the rate of inflation get much higher.
For the time being, the dollar will maintain its strength, which will translate into great investment opportunities, specially for US investors. However, all the global “bail out” plans come with a very high price tag. Therefore, in a few months, we will see how the long term down trend of the US dollar will accelerate.
With all of these in mind, there are several steps you might take not just to protect your investments but to benefit from all the great opportunities the market is preparing for all of us:
1) Before the US dollar retakes its long term depreciation, take advantage of the current US dollar strength and purchase other safe currencies such as Swiss Francs, Euros and New Zealand dollars specially if you hold a lot of US dollars or if you are a US investor.
2) Gold is the only true currency throughout history and the key secret to many high net worth families’ wealth. Therefore, I recommend you start purchasing physical gold in the form of investment gold coins. Buy them slowly when you see weakness in the price and store them in a safe place. Keep in mind, this investment is for safe keeping as a financial security, do not expect to obtain great profits from it, see it more as a future investment insurance.
3) I would also buy safe stocks that generate lots of cash. Safe companies with high dividend yields will be the stars of the future. Buy companies with long records of raising dividends and companies with high dividend yields. Dividends act like ballast in a bear market. They prevent stocks from falling too far. Dividends also attract safety-conscious investors... and investors looking for income to supplement their day-to-day standard of living. So, use the upcoming volatility in your advantage, whenever you see a weakness in share prices, buy these type of stocks.
4) Last but not least, I suggest you maintain cash for a few months’ expenses. This could be one of your most important investments. Many investors think that by holding hard cash you are loosing buying power and, under normal conditions, they are right but, as we all know, these are not normal conditions, actually the opposite. The first rule of any successful investor is to maximize profits MINIMIZING risks. Therefore, maintain a healthy percentage of your portfolio in cash.
As I have always recommended to all my clients, be a contrarian and when an opportunity nocks on your door, please TAKE IT. I can tell you with great certainty, that the right thing to do now is to buy stocks. In fact, in my entire career, I have never seen a better moment to do so.
In his bullish column in the New York Times, Warren Buffett was reminding the public of his famous phrase: “Be greedy when others are fearful”. For the first time in decades, he was putting his personal account into stocks. His column explained why he thought stocks would be a much better investment than U.S. Treasury securities in the years ahead.
In spite of what some media could be telling you: "That might be right for Buffett because he's rich and can afford to take a risk, but for most of our viewers, the market is too risky", I happen to agree with Warren Buffet, this is the right time to buy solid safe stocks.
But, remember, do not jump blindly into the market, search for safe, solid companies with high yield dividends and wait for the right time, take advantage of the current volatility to buy at low prices.
Good Investing
Fernando M. Albert
Source: http://www.ArticlePros.com/author.php?Fernando Albert
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