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R. Kevin O’Keefe, CIMA®, AIF® | Chief Investment Officer

The media has not served investors well. Remember the dot-com stock panic of 1999–2000? It was born of greed. Many investors rushed to buying stocks—especially in technology—for fear of being left behind.

The media darlings of the time were cheerleaders for the dot-com era. Is it any wonder that so many investors stampeded into high-flying stocks with no viable financial strategy?

A Bull Market for Fear
The media has caught the doom-and-gloom wave again. With heightened uncertainty about housing, the credit crunch, oil prices, and more, expect to see ever more ominous predictions about all things financial.

This is a GREAT market for the media. Bold predictions—the scarier the better—help sell newspapers, magazines, and books. Client-focused investment professionals who advocate a patient, disciplined course are BORING.

Lifeboat Drills
As a passenger on a cruise ship, one of the first things you learn is what to do in case of an emergency. You become familiar with the lifeboats in case you need to use them. Your “emergency response” is planned in advance of any actual emergency.

Investor behavior is the single most important factor in investment success or failure. It’s imperative to guard against self-defeating behavior. The worst thing you can do is panic when times get tough.

It’s helpful to periodically conduct your own mental lifeboat drill. Consider how you would react if a financial storm were to occur, coupled with foreboding media coverage. Will you panic? Ride it out?

Resolve now to be immune to dire predictions and to maintain a prudent investment course. If, in the course of your mental lifeboat drills, you come to find that you simply cannot make these resolutions, then consult with your advisor about adjusting your portfolio now. Your portfolio should always be comfortable enough that you can stick with it in difficult times.

No One Knows
Maybe the stock market has already bottomed. Maybe we have further to go on the downside. No one knows. But that does not prevent people from making predictions. You need to take all predictions with a large grain of salt, because no one knows what the future holds. No one!