Every now and then the market (both fixed income and equity this time)
retrench for a while as the experts in the Media and on Wall Street try to sort
out
events political, economic, social, atmospherical, etc. When this happens, it
creates a "double whammy" affect on monthly portfolio Market Values while
having no impact whatever on these three important elements of the properly
constructed investment program:

"Working Capital" continues to rise every minute of every day as nothing
has impacted the cash flow you receive from your investments. Good companies
remain good companies and income producing securities continue to spit out
dividends and interest in spite of the fact that their prices adjust to interest
rates or to current stock market conditions.

The "Quality" of the securities that you own has not and should not
suffer. The same factors that affect quality do so under any and all market
environments.

All things being equal, the "Income" you have been receiving will either
remain the same or increase. Corporations continue to increase (and rarely
cut) their dividends periodically and the vast majority of interest payments
cannot be lowered. Managed fixed income investment companies can now get higher
short term rates when they reinvest,

More significantly, corrections of this type give investors the opportunity
to add Equity inventory to their store shelves (a chance to buy stocks cheaper
than last month) and to increase their overall yield from fixed income
securities by purchasing additional and/or old holdings at lower prices. Sure,
if you
hold open end mutual funds you can't appreciate this, but I've been telling
you for years to stop beating yourself up with those things.

As you move further and further away from that old Mutual Fund mentality,
based on some "market timing", "core portfolio", "trend analysis" or other
"certainty" pipe dream, you will begin to realize that both market corrections
and
rallies are wonderful and all too short lived (in investment time) friends.
Embrace each of them and you will succeed. If you feel as though you have sold
(taken profits) too soon, or that you have gotten yourself totally reinvested
while either market is still falling...you are doing it properly!

What I try to do is just that, by buying when prices move down from their
highs (20% or more for equities), averaging down on existing holdings, and
selling whenever a reasonable profit can be obtained. (Right now, you should be
looking for less than the usual 10% so you can take advantage of new
opportunities.) You cannot do anything about changes in market values. The
market is too
big and the hysteria generated by slight changes in expectations too pervasive.
This is the "known world" of investing and we deal with it by dealing only
with "investment grade", income producing securities. Never let "FEAR" cloud
your
thinking and always jump on the opportunities created by those that do.

So relax and enjoy the opportunity to buy less expensively just as
enthusiastically as you will enjoy new profit taking opportunities when it is
their turn
in the main ring once again!

Steve Selengut
steve@...
800-245-0494
-----------------------------------------------
Read "The Brainwashing of the American Investor" Book Reviews


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