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As a long-term investor in 'New Economy' (I hate that term already) companies, I am always pleased to see that the bears are out in force. Ditto for those who say that they are keeping their money on the sidelines. I will get nervous when the large majority of investors say that they are fully invested. This is an indication that there is no more money to flow into equity investments.

While I don't know what's coming in the next few weeks/months, there are some things that I do know for certain:

1)I can't predict the market top.
2)I can't predict the market bottom.
3)A large proportion of a stock's yearly gains may occur over a very small number of days.
4)At any given point in time, any particular stock is priced at its current price because some of the people think it's going up and others think it's going down (if not, the price gets pushed up or down until this equilibrium is reached).
5)Over time, the market rises.
6)Over time, cyclicals (like resources and oils) underperform non-cyclicals.
7)Over time, companies in growth industries will outperform more mature industries.
8)Comparisons of fundamentals between companies in similar businesses can increase the likelihood of picking solid companies (and more importantly, avoiding the stinkers).

With this information, I can deduce that it is generally better to be in the market than out of the market. I can also deduce that it is not that difficult over the long term to outperform a resource-heavy index like the TSE300 (and similarly outperform debt instruments, money markets and

Armed with this information I

1) Don't try to predict a bear market
2) Don't lose sleep when one occurs
3) Don't listen to those around me who have told me to sell in the last 3-6 months (something which would have severely limited my gains over the last year)
4) Don't worry when my double-bagger (or 5-bagger, fill in your own number here) drops 20%.
5) Reassess my portfolio from time to time to ensure that my reasons for buying still apply
6) Look for neat new ideas when I have a few spare moments.

These all sound straightforward, but reminding myself of these principles from time to time helps me sleep peacefully.

Sleep tight.

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