LESSONS TO LEARN FROM A VOLATILE YEAR
This being our last issue of The Bull Market Report Weekly for the 2000 calendar year, we’ve decided to close out with a
brief story on the lessons that every investor should take away from this volatile year. For technology investors, the
year 2000 represented both the best of times and the worst of times. Although things couldn’t have looked any better
in March, the Nasdaq finished out the year with its worst performance in history.
As the year draws to a close, we always like to go back over some of the things that we learned this year so as to
avoid the same mistakes in the future. So, in short order, we learned the following twelve things this year:
1. Interest rates matter.
-- This one needs no explanation.
2. Asset allocation matters.
-- Technology enthusiasts learned that Utility and Drug stocks can be exciting. Even if they were only 10% of your
portfolio, at least that 10% would have gained 30% on the year.
3. If you can’t understand why a company is valued where it is, then it probably isn’t valued correctly.
-- This is for all of those fundamentalists who kept wondering why earnings seemed irrelevant.
4. Stop-Loss orders sometimes come in handy.
-- This is a touchy subject. Although fundamentalists would argue that when a stock falls (while the company and its
future prospects remain intact) it should become an even better BUY, it’s hard to ignore the fact that stop-loss orders
could have saved our butts this year.
5. Keeping a certain percentage of your portfolio in cash is a good idea.
-- Bargain hunting is tough to do when you’re out of money.
6. The market tends to swing too far in both directions.
-- When things seem too good to be true (remember March), they probably are. When it seems like everything is falling
apart (now), it’s time to buy.
7. If one lone analyst disagrees with the rest of the Street, you should listen to what that analyst has to say.
-- This situation happened over and over again, where we saw one analyst lead the pack when calling for a slowdown in
a certain sector.
8. There are ways to make money in down markets.
-- Short selling, buying puts, selling calls. These are all valuable tools, and we should use them once in a while.
9. Patience.
-- Investors who have this will be rewarded handsomely next year.
10. Impatience
-- If you’re going to get out, get out at the first sign of an earnings shortfall or accounting irregularity. This rule could
have saved us a great deal of pain this year.
11. Remember to appreciate what you have and learn to forget what you have lost.
-- The markets are not without risk, and this year was proof positive of that fact. But don’t let it discourage you.
Over the long haul, the stock market has consistently outperformed all other investment vehicles, and it will continue to
do so in the future. Don’t let one bad year scare you away from a historical fact -– the stock market is simply the best
place for your money.
12. Don’t go it alone.-- In the late 1990’s, it seemed like anyone with an online brokerage account thought they could
match wits with the best financial minds in the country. When everything is going up, investing is easy. But the hard
times are when investors need the most guidance. Through the efforts of our team of journalists and dedicated
research staff, The Bull Market Report will be there every step of the way to provide that guidance in 2001.
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