A Real Look at Market Cycles and How to Get Off of the Rollercoaster

Historically, investors experience emotions that correspond to market cycles as illustrated at right. Due to recent events, a number of investors find themselves nearing the emotional trough and consumer confidence is at an all-time low. As a result, investors are making highly emotional decisions just when it is important for them to make well-reasoned decisions. Investors tempted to move to cash right now are not only locking in their losses, they are timing the market. Without a well-planned exit strategy and a well-timed re-entrance strategy, this could produce disastrous results to a portfolio.

For example, less than 1% of trading days accounted for 96% of market gains between 1963 - 2004, and those who missed the 90 biggest days in that period gained only 3.2%, while those who stayed invested through the ups and downs gained 10.84%.

It is important , especially during these unprecedented times in the market, to recognize the importance of keeping emotions in check to help keep calm and maintain a sense of perspective.

If an investor has a portfolio that, upon review, could be re-allocated to include alternative investment vehicles to ease some fear and provide a damper to volatility, it could be a good compromise for someone feeling the urge - due to panic - to pull out of the market entirely. But if have already pulled everything out of the market, then you have nothing to lose by looking at alternatives to securely replace the ultra-low yields offered in banks today.

Do your research on private investments... you'll thank me later.