What to do with your money now

First, the don't do:

1. Do not listen to the experts. I notched that when the market is up, the experts are busily recommending stocks. Right after the market tanks, financial advisors come out from the woodwork. And guess what they all say? Be in cash. If you listen to advisors, you will be buying high and selling low. That is a sure way to manage a small fortune to a subsistence.

Now what to do:

2, With the finger pointing and bellowing in Washington, you can be sure that the economy will stay in the dumps for a lot of years. The experts that tell you how well the index of stocks have done for the past 20 years are driving with a rear view mirror. The USA economy may get better, but it will still suck for years to come.

3. Be that as it may, there will be periods when the stock market will go up and periods when it will go down. With the advent of huge hedge funds and computer trading, those swings will be wilder than in 10 or 20 years ago. Instead of thinking of the swings as reasons to stay out of the market, you should use them to your benefit. But how?

4. Pick a company you really like and is presently undervalued. Some people look only at the price of the stock. Don't do that. Some companies issue billions of shares of stock, so that each share has a low numerical price. That doesn't mean it is cheap. The valuation of the company = Share Price X Number of shares

So that company can still be overvalued, because there are so many shares out there.

Conversely, a company like Apple, Google. Intel, NVidia are growth companies, and have a lot of cash in the bank. Yet the market still price them below the average, low growth, low cash reserve, stock.

5. Does it mean you should jump in and buy these stocks? Definitely NOT!!! As cheap as these stocks are, there will be times when the market wants to give them to you by dropping their valuation another 0% or more. It happened from Sept 2008, after Lehman went under. At first the drop was reasonable, given the catastrophic event. But after awhile, the price drops was ridiculous. Some income stocks were yielding 30% or more!!! Two years later, the markets recovered, and a person who bought it near the bottom would have realized 100% - 200% gains! It happened on 8/8/2011, after Standard and Poor downgraded US debt. A week later, the market recovered most of it's losses.

Believe me, the market is so psychotic, this will happen again and again for the next few years.

6. So what do you do? I recommend that you hang on to your cash and wait until the next show begins. Then gauge the severity of the bad news. If it is severe (like Lehman crash), then wait a little longer, until the skies start to clear. If the news is less severe, then the down cycle will be shorter.

Use 40% of you money, and Buy those stocks you

chose in Step 4. If the markets continue going down, buy more. But keep some cash around in case you have not called the bottom. If the market starts rising, before you have had a chance to buy more stocks with the remaining 60%, then oh well, don't fret it. You will still make more money than the experts.

I started with $500 in my pocket when I first moved to this country, and I have always lived by the mantra --- don't listen to the talking heads!!!