| Property | Value |
| Name | Sept. 2011 - The Best Alternative |
| Description | The Best Alternative Capital markets are reflecting bad news throughout the global economy. In the U.S. aggressive monetary and fiscal policy has served to stimulate fears of inflation and growth of the national debt, but little else. European policymakers face a debt crisis that threatens the viability of the European Union, and now growth in China appears to be slowing as well.
Dramatic market volatility can leave many investors to ponder: "What should I do now?" We take this opportunity to remind you of the advantages you have gained by subscribing to a newsletter published by an advisory firm that is wholly owned by an economic think tank dedicated to providing citizens with useful, objective analysis. Current events have not changed our philosophy or strategy, and we remain highly confident in our research and our approach to investing.
Economists are trained to view the world the way it is, rather than the way we would like it to be. Consumers, firms, and investors must choose among available alternatives, all of which entail trade-offs. Though economists disagree on many topics, few if any dispute the fundamental notion that investors live in a world in which the pursuit of greater returns is impossible without the assumption of greater risk.
Your best alternative remains a well-diversified portfolio based on sound empirical research.
It might be tempting to sell your financial assets and go to cash. This is always a gamble as it requires guessing correctly twice, by selling when securities are about to fall in price and eventually buying in again, but not too late so as to have missed the rebound. This strategy is even more dubious now, considering that short-term interest rates are so low that after accounting for price inflation, negative returns on cash-equivalent assets are virtually certain.
As for stocks, most companies have solid balance sheets. Management has taken prudent action to pare expenses and limit debt. Cash balances are high, though few firms are currently willing to put that cash to work given the uncertainty hanging over the economy. These same firms are well-poised to prosper when economic activity accelerates. The stock market itself serves as one of the early indicators of an upswing in economic growth, so investors are best served by maintaining exposure to stocks. In the meantime, some of these individual firms will fail, but since it is very difficult to identify them ahead of time, diversification remains essential.
Also In This Issue The High-Yield Dow Investment Strategy |
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