Smart Investor's Survival Guide The Nine Laws of Successful Investing in a Volatile Market

Chapter One Law # 1: Know Your "Enemy" --Understanding Volatility Those who cannot remember the past are condemned to repeat it.--George Santayana C'mon, Admit it. For most of you, your portfolio got slaughtered in 2000 and 2001. A millennium mauling. At best, it went into a serious retraction. Remember all those tech stocks that made you think "early retirement" in 1998 and 1999? They suddenly turned against us in 2000. Yahoo!, Broadcom, Sun, Amazon. Hundreds of stocks falling 50 percent, 70 percent, even 90 percent. And many others going belly up. And most of 2001 wasn't much better. Those hoped-for rebounds in the techs never materialized. And many stocks that held up reasonably well in 2000 decided to take the plunge in 2001, too. And just when you thought things couldn't get worse, they did. September 11. The Saturday after the terrorist attacks in New York City and Washington, DC, I was scheduled to speak to a gathering of individual investors in Chicago. I didn't give too much thought to my scheduled talk immediately following that tragic Tuesday. I, like everyone else in America, had freeze-framed my own life to focus on this National horror. But as the weekend drew closer, I began to wonder whether there would be any speech at all. Many gatherings were being canceled throughout the country in the wake of the awful tragedies; not many people wanted to talk about stocks just days after such unprecedented destruction to our country's collective psyche. Truth be told, I wasn't sure if I wanted to talk about stocks either. So when I received a call on that Friday from the individual who had asked me to speak, I was expecting to hear from her that my gathering had been canceled or postponed. Instead, what I heard was the following: "We have been getting a very strong response." That my talk was still on surprised me; that many people wanted to venture into the country's third-largest city--where skyscrapers would serve as reminders that what happened in New York could easily have happened in Chicago--to talk about stocks surprised me even more. But I was surprised for only a moment.Life really does go on, I thought to myself. Actually, life can't help but go on. Life is what all of us do. We live. And living, ultimately, is not a spectator sport. That's why people showed up for my talk. That's why I showed up. That's why you showed up at work on the Wednesday and Thursday and Friday following the attack. That's why you took your clothes to the cleaners, dragged your garbage to the curb for pickup, ran your kids to soccer practice, played with your grandkids after church on Sunday. Life goes on. To be sure, I know there were people who came to my talk who probably felt guilty about attending. After all, it doesn't seem right that anyone should care about something as "trivial" as a stock portfolio when thousands of people are suffering physically and emotionally. But you know what: It's OK to care about your stock portolio. Or your job. Or your pet. Or your refrigerator that's on the blink. Or your car that's running rough. That's all about the process of living, of moving from one day to the next and to the next and to the next. Yes, there is an investment message in all of this. Much is being made about how our own private worlds will be changed forever. I'm not so sure about that. That process of living is tough to disrupt for long. Whenever I'm confronted with the notion that bad times are irreversible, I think back to how people must have felt during the Civil War. Think about that period of history for a moment. A nation under siege from itself. States against states. Families against families. And yet our nation survived. Life did go on. As it will this time. ButCarlson, Charles B. is the author of 'Smart Investor's Survival Guide The Nine Laws of Successful Investing in a Volatile Market' with ISBN 9780385503877 and ISBN 0385503873.