Recently I was asked for my thoughts about a Warren Buffett article in the NYTimes. What follows is my reply to the email:
Buffett makes a sound historical argument. Being one who loves history and who continually works at understanding it, I then looked at my financial statements and they don't match Buffett's position. When I look at my stocks (nearly all mutual funds/bonds) performance since Jan. 1, 2008 I see a large loss. Now when I look at my CDs for the same time period, I see the principle intact with a small return perhaps just above inflation. But the key is I still have the principle! That's not so with the stocks/bonds investment at least for now.
To be sure I'm looking at the short term that Buffett is addressing. So what am I doing about this short term ups and downs that have made some people lose sleep and take Maalox? Hunker down and pray. Meaning keep paying my financial adviser to manage my stocks/bonds/mutual funds while reinvesting the CDs when they mature. In short it's called diversification.
With this strategy I'm hoping the American stocks will come back as Buffett thinks they will. But I'm also hoping the international stocks will come back too. Not just because I own some but world wide financial instability causes wide spread hardship and threatens world peace.
Perhaps buying stock in Maalox would be a good bet.