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Like many other people who are nearing or entering the retirement phase of my life, I have been subjected to the bloodbath taking place in the stock market, like all the rest of the small investors. I am at this moment, down 10.8% in portfolio value from my initial rollover of 401K funds into a brokerage IRA account in June. This is the first time, that I have really had the time to watch the stock market closely, and work hard to maximize the goodness of my investments which are now mostly in mutual funds. I tried to listen real hard to the so-called experts, in order to become a "smart" investor. I fine tuned my portfolio, trying to select the best of the best of the funds, paying close attention to the idea of asset allocation. From June 22 until July 21, when the slide began, I was up by approximately 5.7%, and my cash was nearly totally invested. Since July 21, I have watched the value of my portfolio take two steps backward, and then one step forward repeatedly until now. I have followed admonitions from the "experts" to consider only the long haul, and also not to "time the market". At this point in my life, I am now asking myself the question, "What do these so-called experts really know. They all spout their same tired advice with the regularity of Old Faithful Geyser at Yellowstone Park.

One of the "Great Truths" that the experts pressed on an unsuspecting public was the idea of asset allocation. The suggested allocation for small cap funds was 10%. My small cap funds lost money so fast that I swapped them out for balanced funds within a couple of weeks of buying them.

The suggested allocation formula included the recommendation that 20% of the portfolio should be devoted to international investments. I foolishly complied with this recommendation, even though the troubles in the May, 98 stockmarket were blamed on the "Asia" situation. So I invested my international allocation in European funds, which were doing great for the first half of the year. It is interesting to note that my 22% allocation to European funds is responsible for 36% of my total losses at this point. And yet these idiot experts now have the unmitigated gall to suggest that if the decline of stock prices has "unbalanced" an investors portfolio so that the original allocations have been distorted, the investor should now "adjust" the portfolio to bring it back into compliance with expert allocation advice.

My father used to say that advice is frequently not worth what one pays for it, and free advice is probably worth considerably less. My father was right!!!

Now as to the advice to ignore the day to day market swings, and to view investments only as a long term proposition, I can only observe that if I had the good sense to liquidate my investments on July 21, or soon, thereafter, I would certainly be in much better shape now. I would have gained the cash to invest at the depths of the markets despair, and would come out much better. It is pointed out that owners of IRA accounts are prohibited from using various portfolio hedging options such as selling short to protect themselves from a declining market. The IRA investor is totally at the mercy of the market unless he gets out, and then gets back in at the appropriate time. People who do not try to dodge the bullet and get out of the market remind me of the story about the farmer who won the lotto. When asked what he was going to do with the winnings, he said he was going to keep on farming until it was all gone.

I will offer one other piece of "free" advice to other small investors: IT IS ALWAYS DARKEST BEFORE IT GETS REALLY BLACK!!!!
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