How Long will It Take Your Investments to Recover?

Right now when I look at my investment portfolio I totally start to hyperventilate and have to reach for a paper sack! I try to calm myself by reading analyst reports and knowing that eventually the markets will recover and come back to where they once were.

How long does it take to see some return to normalcy? In an average bear market you should see about a 25 to 30% rise in the Dow Jones with in the first year after the bottom hits. In normal market conditions it can take up to four years to reach the high that was once enjoyed.


This Bear market has been different than those in the past. The rapid dissemination of information has caused information and rumors to get to investors at a much more rapid pace than in the past causing more volatile swings in the markets.


At least this week I haven't had to reach for a paper sack!

"Magic 8Ball Will The Stock Market Rebound Soon...."

I admit that I occasionally shake the Magic 8 ball like a teenager but, when it comes to investing I like to rely on charts and tried and true methods of determining the outcome and direction that the market will take.

In my opinion, we are in the late stages of a bear market. I'm starting to see a sharp increase in Utilities, Oil, and energy these three being the biggest movers. Also an increase in Real Estate Investment Trusts (REITS). Not surprising is a downward trend in Retail, Auto, and Leisure Products. These are all indications of a late bear stage in the cycle and the bottom of a trough.

Another good indicator of a stock market trend is to look at a moving average of the Dow Jones and check the price and volume. Over the past year the Dow declined steadily with it's sharpest drop occurring in the last week of September and the first week of October. The Volume during these two weeks nearly doubled as investors scrambled to pull out of the markets and stuff what was left of their holdings into safe keeping. The heaviest volume was trading at 2,344,911,100 compared to 778,840,100 in the first week of September. Over the past week the market has been trending up in light volume of 472,561,500 as investors are looking at bargain sale prices and are coming back into play.

"Magic 8 ball does my true love, love me back....Oh sorry," Does this all mean we are ready for a bull run? Maybe, keep an eye on the Dow Jones average. look for a sharp increase in Volume and Price change. I think it could still be choppy for a while yet but, I'm looking for the bull to be let out of the pen in the not too distant future.

Keeping your home from foreclosure

WASHINGTON (MarketWatch) -- The Treasury and the Federal Deposit Insurance Corp. are working with the Federal Reserve and Fannie Mae to prevent millions of home foreclosures, Treasury Secretary Henry Paulson said Tuesday in an exclusive interview on "Charlie Rose" on PBS airing Tuesday night, according to a transcript of the interview. Paulson said the Treasury is readying plans to buy troubled mortgage assets from banks and other investors. "There is clearly more that can be done, needs to be done," he said. "We are looking in the millions. And we need to do everything we can to minimize that," Paulson said. The actions by the FDIC to guarantee bank debts are already working, he said. "The credit freeze is beginning to melt."

If you have fallen behind on your mortgage payments or if you have started to receive delinquency notices in the mail don't panic! There are people who want to help you and you do have options available to keep your home from going into foreclosure. Also, be aware that there are people who want to help themselves and they will try to take advantage of your situation. It's their intention to try to take your money or your home. The best way for you to get your finances under control is to create a budget.

1. Take a good look at your expenses and see what areas you can cut back on and if there are expenses you can cut out all together--even if it's just for a few months to get you through.


2. Make your house payment the most important payment. Pay that every month before every thing else.If you feel that you are getting into trouble and delinquency notices are coming in the mail, contact your lender immediately and see if you can work something out.

Don't feel like you have to take care of the problem by yourself or that the situation is hopeless. Your lender does not want to foreclose on your home, it will cost them too much money to do that. They would rather find an option that works out for both of you. Here are some options that you have:

• The insurer can pay the amount that you are behind on in exchange for a promissory note from you and you pay him back over time.
  Ask to have the loan changed to reduce the interest rate or extend the term of the loan and add the missed payments to the existing balance.


• Pay the entire amount that is over due.
  Convert an adjustable rate mortgage to a fixed rate mortgage.


• Forbearance agreements --payments are temporarily delayed.
  The FHA Secure Plan--If you are delinquent because of an interest rate reset you can refinance into an FHA-insured mortgage through The Federal Housing Administration (FHA) To check out information on the FHA refinancing guidelines:
  http://fha.com/
  

Also be aware that there are foreclosure scams that are manifesting themselves like greedy specters. The most common ones are people offering to help you negotiate with your lender for a huge amount of money or they offer to make your payments and you can stay in your house until you can buy the home back from them. What you don't realise is that they are taking possession of your home with the equity that you have in it and sure you get to stay in your home but, your paying rent now! The scam artist owns your home and the equity. Don't feel pressured into signing any agreements without a lawyer looking it over. There are legitimate housing councilors that will help you.You can contact a councilor at the Department of Housing and Urban Development :http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfmAs always, check out a company for complaints before you do business with them at The Better Business Business Bureau at:http://www.bbb.org/

The Federal Deposit Insurance Corporation (FDIC) is reporting a higher number of unprofitable banks and problem bank and savings institutions than in the past two years. Much of the problem stems from charge offs to industrial borrowers, bad mortgage loans, and home equity lines of credit.While the number of problem banks is not out of line if compared to historical data from the past five years, what is troubling is the sharp increase in home repossession and foreclosures and the impact that this can have on the banking industry. In a Fox news report on February 26, 2008 titled, Homes Facing Foreclosure jump 57% in January, the reporter stated that In January they witnessed a 90% spike in the number of homes going back to the bank. Homeowners can't meet their payment requirements and the homes can't even be resold at auctions. If your bank does happen to fail, what happens to your deposits and investments?If your bank does fail it will most likely be acquired by another bank or the FDIC will intervene.
The FDIC will insure up to $100,000 for checking accounts, savings accounts, certificates of deposits and IRA retirement accounts at Federally insured institutions.
The FDIC does not insure mutual funds, annuities, stocks, bonds, life insurance policies or the contents of safe deposit boxes.
The Securities Investor Protection Corporation does insure and replaces missing stocks of up to $500,000 if a bank fails.
Treasury bills, notes, and bonds are still safely owned by the investor. The holder can request a document showing ownership from the bank acquiring the failed bank or from the FDIC if the failed bank is not acquired by another institution. You can then take this proof of ownership to the nearest Federal Reserve Bank to redeem your T-bill.
The contents of your safe deposit box are not insured by the FDIC. If you are concerned about theft or fire you can obtain insurance through your home owners insurance. If your bank does fail the bank acquiring your bank will take over the offices and safety deposit boxes. If there is no acquiring bank ,the FDIC will notify safe deposit box owners to come pick up the contents of their boxes.
Credit Unions are insured by the National Credit Union Administration for deposits of up to $100,000 at Federally insured institutions.
If you would like to make sure that your bank or savings institution is Federally insured you can do so at the Federal Deposit Insurance Corporation.
Bank Find- http://www2.fdic.gov/idasp/main
References:

Should You Buy Back Into the Market?

I admit, to jump back into the market today you would have to seriously "grow a pair" as big as an elephant! There is still more room for the market to drop apparently another 9,000 points! Logically, if you are a wise investor you can start to see the opportunities that are unfolding before you. There are bargains that you can buy into for a pretty sweet deal and you should consider picking them up while they are so low. Consider buying for a long term horizon.

The Stock Market is a leading indicator of the economy in that it precedes the economy by about three to four months. Analysts believe that we will see a decline in the Gross Domestic Product (GDP)for at least two quarters. Technically this spells out, can you say it as a whisper,--Recession. The definition of an economic depression is if it prolongs into years rather than just a few quarters.

So, should you start buying again? You should start to see the market bottom out and heading back up within the next couple of weeks to a month, so if you want go out and grab some bargains do your research and make sure that the stock is sound and that there is solid management and good prospects behind it. Be proud of your cojones amigos!

Checking Your Risk Aversion While Investing

I love those investment commercials with the baby making the trades. I first watched one of those ads during the Super Bowl with the baby making trades and saving his money to buy a clown and then he goes,"but, I underestimated the creepiness factor!"
When you first start out creating a new investment portfolio some good questions to ask your self aren't what's happening in the markets today and where is the next big move coming from? Don't get me wrong, these are always questions that are on my mind,especially lately, but when first starting off you need to take a good hard look at who you are as an investor. You need to determine:

• How risk averse you are--or how much risk are you willing or can you comfortably take on?
• Asset allocation
• Your age
• Other factors such as family obligations and your personal circumstances and goals.
  

Investors have different tolerance levels when it comes to risk. Some are Vegas gambling churners, who like to get in and get out buying low and selling high with out a care in the world as to market corrections or severe tumbles. Other Investors just want to hold on to their money and play it safe. Other factors should be evaluated in determining how risk averse you are or in many cases should be: your age is a factor and which stage of life that you are in--if you lost a great deal of money in a correction how would that affect you and your family? If you have children, that should be a factor.
Taking your age into consideration is important. If you are young--in your early twenties or thirties with out a family you can afford to take on more risk because you will have the ability to earn the money back over your lifetime if you experience a severe market down turn (make sure that you keep a cash stash for emergencies as well.) If you are on the other side of the coin and retirement is in the not too distant future, you will need to manage your portfolio to avoid risk and move into tax savings and income earning investments.
It could also be a goal trying to safe money for college expenses. If you are trying to save money for college and your children are getting closer to the age where they will be going, you will need to place the money in safe investments like long term CDs or Treasury bonds,that sort of thing.
If you feel that you have a great deal of risk aversion but, you would like to get a more of a return on your investment than what your savings account at the bank has to offer, check out CDs, Treasuries bonds, and Municipal bonds. With Municipal bonds check to make sure that they have aaa rating. Use a mix of 30% stocks, 60% bonds and 10% cash
If you are a conservative investor but, you would like to see growth use a mix of 60% stocks, 30%bonds, and 10% cash.
If you are an aggressive risk taker use a mix of 60% stocks, and 40% bonds
If you would like to take your age into consideration a general rule of thumb is that you take 100-your age and that's the percentage of stocks you should keep, with the rest divided among cash and bonds.
If you don't have an investment broker picked out be careful about who you choose. It's your money and you want keep it safe--you don't want to run into problems down the road. Personally I like to invest with investment companies that have a proven track record of excellent customer care and investment management. I was conducting some investment research in the Library and I came across this one statement that with one of the new online companies, that their investors were fleeing in mass! I probably shouldn't tell you this because that baby is going to come after me in the middle of the night like the Seed of Chucky from those Child's Play horror movies!