How to Gain from the Economy's Pain

By Chatzky, Jean | Newsweek, August 29, 2011 | Go to article overview

How to Gain from the Economy's Pain


Chatzky, Jean, Newsweek


Byline: Jean Chatzky

Want to make like Warren Buffett and turn the market's risks into your reward? Five investment strategies to embrace now.

Warren Buffett has said that a simple rule dictates his investment strategy: be fearful when others are greedy, and be greedy when others are fearful. Well, he must have cleaned up the past couple of weeks as panicky investors caused the markets to tank and rally and tank and rally again. The VIX, the volatility index--also known as the "fear gauge"--climbed 40 percent in a single trading session.

Enough with all the scrimping and saving, the austerity plans, and the slowly disappearing retirement accounts. Here's how regular people can make like Buffett and win big in these roller-coaster times.

"Everything dropped ridiculously low as a knee-jerk response" when the S&P downgraded U.S. debt in early August, says financial adviser Ric Edelman, author of The Truth About Money. "I think everything is unfairly valued."

He's not alone. Plenty of the best financial advisers, money managers, hedge funders, and economists will tell you there's opportunity hidden in the pain of economic downturns.

This is not about taking more risk than is appropriate for you. Instead, it's a chance to do two things: First, fix your mix--in other words, rebalance your portfolio. And second, remove cash you have from the sidelines and put it to work in sync with that asset allocation.

Both those things will give you the opportunity to capture some significant bargains.

There's just one caveat: we are talking about investing for the long term here. Money that you need in the next three to five years doesn't belong in the stock market now--or ever. With that out of the way, here's where the experts say to put your money to work.

The S&P 500.

"When the S&P 500 experiences a day where all 500 stocks decline, it's a pretty clear indication that the market is oversold," says Edelman. "So buy the S&P 500." That's the appropriate advice for investors who have made the decision to hold broad, diversified--and, by the way, low-cost--index funds and exchange-traded funds rather than sectors or individual stocks. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

How to Gain from the Economy's Pain
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.