Tuesday, January 27, 2009

Same verse, same song: Don't be lured back into the stock market despite the CNBC guest analysts

I heard it again today -- another CNBC guest analyst telling investors that it's time to get back into individual stocks that are at such a bargain -- even though you may still lose some money at the beginning.


Please. Wait. Show some discipline and patience. These stocks are going to be at even more of a bargain later this year and even early into next year. High dividends do not make up for lower share prices.

Here are my credentials once more. I got out of the stock market above 12,000. I chastised self-proclaimed financial guru Dave Ramsey for telling NewsChannel 5 viewers in Nashville that it was all right to get into growth mutual funds last September when the market was at 10,600. I also was an economics writer for 10 years.

Now, Tennesseans who listened to him have lost 25% of their money. And since they've been convinced to stay in the market for its turnaround by financial advisers, they'll lose another 20% of their money in another year.

Individual stocks -- while you may hit a short-term gain -- are not the place to be in now. No one is smart enough to make these kind of picks or discover the next Apple. And if they are, they're only available to people who have mega-millions of dollars -- and who will pay richly for this kind of information.

For regular folks, you won't ever know until after the big profits have been made.

The markets will continue to trade in a frustratingly narrow range, then take the plunge to 6,300 or lower to reflect the economic times and low consumer confidence and spending.

For instance, last August, my subsequently fired financial adviser got me into five stocks of our choosing. Three weeks later, I cut my losses from my $40,000 investment after $2,500 in decline. Now the stocks such as Berkshire Hathaway, Google, Pfizer and Union Pacific are much lower.

It will be the same with stocks that seem a bargain now.

These guest analysts only want you back in the market to make fees that pay their salaries. Your losses are not their losses. So be patient, and wait for better bargains to come.

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