Stock Investing: How Should Investers Proceed In 2011

Happy Anniversary, Investors!

Douglas Coe, chief investment strategist and managing partner of investment banking and capital markets at Moody Reid Financial Advisors in Kansas City

The reason for the rally:

I believe president Obama is reining over one of the biggest stock market rebounds in American history. I’ve been on Wall Street over 18 years. This is one of the biggest bull markets I’ve seen. I don’t think it has dawned on anybody yet but if you bought in right after he was sworn in you made a killing.

The market rallied back because… people tend to move when they invest in a herd like mentality. There were a lot of uncertainties heading into 2009 that people were just not clear of the direction on key economic fundamentals of the United States and the global economy. Once we saw [there was] a transition of power…[and that]… President Obama, was very capable and understood the surrounding economic factors that needed to be addressed, the market exuded a lot of confidence. [We knew] that although the short term would be choppy, the long term prospects for the country and the world looked great.

Predictions for the coming year:

I believe [the rally] will continue because no one expects it too. I’m very bullish and very noticing of healthcare. I just simply believe that no matter what side of the aisle you’re on we’re going to do something fundamental…to address this healthcare issue. I don’t know if everyone can agree to all the aspects of it, but one thing you know is that people… will need healthcare, food, clothing, and shelter.

If you are looking at a longer term view, it is a really good time to look at the housing situation. I don’t believe in 10 years you will be able to buy real estate and land this cheap again. You tell me with a growing population people aren’t going to need housing in 2030.

Advice to investors:

One of the things you have to really resist doing: don’t be so day to day. Take a step back. Look at the long term. A lot of times we get hung up looking at the share price day in and day out. That is not how you make real money. The greatest times to invest are when things look the worst.

You have to now more than ever diversify. Use dollar cost averaging over time. You inherently buy more when prices are less and less when prices are high. That’s the key. Don’t look at it this week, next week or next month. You have to be forward thinking, but most importantly you have to be forward doing. The winners over the next years will be those that see tomorrow, today.

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