We’re still the land of (investment) opportunity

Published 11:14 am Friday, January 23, 2009

Over the past several months, you may have become somewhat discouraged at the prospects of investing for your future.

Every day, it seems, brings another piece of bad news: stock market volatility, a decline in manufacturing, housing prices in freefall, auto companies teetering on bankruptcy—the list goes on and on.

However, despite these distressing headlines, you are still living in a country that is home to the most powerful economic engines in recorded history—and while these engines may currently be stalling a bit, they still offer the power and the potential to successfully drive your investment vehicles.

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To get a sense of this size and strength, consider the following: If the world population of 6.7 billion people were represented by just 100 persons, only five of them would live in the United States—but these five would have some pretty big economic clout. In fact, they would own 34 percent of the world’s equity market capitalization and 25 percent of the gross world product, according to Bloomberg News.

Furthermore, these five people would be responsible for technological breakthroughs that resulted in electric lights, telephones, airplanes, television, computers, the Internet and much more. And they would produce the world’s largest supply of electrical energy and sit on land that contained nearly half the free world’s known coal reserves, according to the Energy Information Administration. For good measure, they would account for 37 percent of all Nobel Prize winners, according to the Nobel Prize Foundation.

Taken together, these and other factors reveal a robust supply of natural resources, intellectual capacity and entrepreneurial spirit—and these assets don’t melt away in any bear market. Instead, they point to the long-term expansion of our economy.

And who owns the bulk of these corporations?

More than 90 million American shareholders—and more often than not, their patience, discipline and confidence has been rewarded in the long term.

What new investment opportunities lie just around the corner?

Some await our focus on “green energy.” Others anticipate the reinvestment in our infrastructure, a key element of the Obama administration’s economic stimulus plans. These areas may be promising, but they won’t tell the whole story of the future of investing—because those chapters have yet to be written.

In the meantime, what should you do?

Stick with these tried-and-true strategies:

• Look for quality. Seek out quality companies—those with long track records of profitability, strong management teams and competitive products.

• Think long term. We’re likely to continue seeing volatility in the markets, though perhaps not to the extremes of the past year. You’ll need to look past these short-term price movements and commit yourself to investing for the long term. Over time, quality investments usually pay off.

• Maintain adequate liquidity. If you have a short-term goal—such as paying for college in two or three years—set aside an appropriate amount of money in liquid investments that are likely to preserve your principal.

• Stay invested. Don’t take a “time out” from investing. The biggest rallies usually occur early in a bull market, and if you’re on the sidelines, you’ll miss out on these growth opportunities.

America’s future is still bright, and yours can be, too—by investing wisely and patiently and by focusing today on your goals for tomorrow.