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Like a lot of people I think I've experienced quite a range of emotions these past few weeks -- from fear -- lots and lots of it, to resignation as I've watched most of our net worth drop 45% plus in the market over the last year. My coping mechanism has been to read all the market history I can find in order to find some reasons to have confidence in the future and try to laugh at the parodies on the situation as Rome feels like it's burning (the Fool's article on what they'd write if they wrote the Onion was pretty clever).

Disclaimer: What I'm going to write offers no suggestions for anyone to follow -- just my recent experience. Maybe it will be helpful, maybe not -- I'm a fairly inexperienced investor.

Lessons learned (or that I'm still learning):

1. Diversity will SAVE you.

I'm DOWN 45+% percent since Oct 2007, and I still own the following swath of devastated stocks [FMD 4 positions (90%), AIB -- 4 positions (70%), CRZ - 1 pos (95%, CX - 3 pos (70%), PRS - 4 pos (80%), MF - 2 positions (80%), JLL - 1 pos (70%), SCSS 2 pos - (70%)]. I only put in a few hundred $ per month (1 pos for me) and have been for several years, but as you might imagine, that's a lot of months of income totally wiped out. The bright side is that many more positions are either not down nearly as bad and a few are even positive over the past few years. I own positions in 70 or so Companys, so one implosion or even 8 major implosions do not sink the ship.

2. Small + International = MASSIVE VOLATILITY

Of course I knew this, but I had no idea just how true it was!. 80% of the stocks I own are small caps and international. I'm only 31, so I figured I'd go with the best shots at the largest long term returns. Wish I'd waited until 2009 to start this strategy!! That said, I still believe in this approach, but the past few months for my monthly acquisitions have been trying to pick up decent large cap dividend payers like GE for sanity sake instead. (Not selling the others though). It is interesting to note that I'm not far off the major markets declines though even with a "more volatile" mixture (Thanks to lesson #1).

3. Dividends really help

Reinvested dividends buy a lot more shares in times like this (even after they are cut like BAC which I also own and have watched hammered)and this is critical to someone like me who does not have a lot to add to the market each month. I makes the paper losses feel a lot less painful to know more shares will be coming along -- a la PDS.

4. Markets will right themselves and better times will come.

Reading Stocks for the Long Run by Jeremy Siegel gives me a lot more hope in the midst of this. He makes an interesting point that those who bought at the market peak prior to the 1929 crash actually made money (about 6% annually) if they stayed in until the market recovered to the pre-crash level due to the reinvestment of dividends -- if you owned the broad market. I don't own the broad market, but have enough dividend payers that roughly give me a similar yield -- maybe a little more. Knowing that this was the case in the great depression, something far, far worse that is the case now, I feel a little better.

5. There can be somewhat of a future payoff

Although a huge percentage of my positions might stay underwater for years, the purchases that I make over the next 3-5 will hopefully pay off much better than would have otherwise be the case.

6. When I hit my mid 50's I sure as heck won't hold near as many small caps and possibly fewer internationals as I will certainly need dollars to live on.

7. Trying to save a couple of months of income in cash is a really good idea. I've never done this and with children I can especially see why that's smart now. Oops -- working to fix this now.

If any of you read all of this, thanks for bearing with me. I'd welcome any insights as to what others are learning as I'm trying to beccome a much, much better investor. I thank God for his provision for us and for an understanding wife who has not worried nearly as much about this as I have.
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