A few days ago a good friend of mine asked for my opinion about the recent stock market decline. His 401K had lost over 40% of its value in the last 12 months and the market was in a free fall, or so it seemed. He asked me if he should sell before it was too late.

While I don’t pretend to be a financial adviser, I do know a few things about strategy. Strategy is a long term plan of action designed to achieve a particular goal. Thus, strategy is the compass that you use to make day-to-day decisions, while keeping your focus on your long term goals.

In my friend’s case, his long term strategy was to earn a 5-6% annual return on this 401K hoping to retire in ten years. Capital preservation and safety was a priority. His investment vehicle was corporate stocks and bonds.

Selling on the way down or at the bottom would be a lousy decision for my friend and I told him so. I reminded him that the stock market is volatile and that if he cannot tolerate that volatility he should invest elsewhere.

Despite the recent slide of the stock market, his long strategy had not changed a bit. His long term goal for retirement remained the same and he still had ten years to go before he would make his first withdrawals.

Got a good strategy? Stick with it.

John Bradley Jackson
© Copyright 2008 All rights reserved.

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  1. I would have told him to buy more, it’s a fire sale and we are near the bottom. (Warren Buffet made his move already!)

    The stock market is for the long haul, get a towel. Don’t panic.

  2. Anonymous


    Of course you are right.


  3. Warren bought perpetual preferred stock with a 10% off coupon. In the meantime he will be collecting his dividends. And if the companies (GE, GS) were to be liquidated, Warren would get his share before the common shareholders got a penny.

    Please understand, the reason a fire sale is occurring is because the house is on FIRE. Beware, you might get burnt and Buffet gets paid back before everyone else.


    P.S. “I don’t care where stocks have been, I care where they’re going, and I don’t want people to get hurt in the market.” Cramer


  4. Anonymous

    Warren Buffet is out to make money and that means when he does others don’t.


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