Smart Investing

I've been saying for months that there will be a pullback; it is normal when one is investing.

But what I'm thinking is going to happen is, investors will start worrying again about all the potential problems out there. With the worry will be the thought of, maybe they should get out of the market and hold onto the gains they have made so far. I must tell you, this would be a big mistake -- not only because they will miss the growth I expect to see over the next 14 months, but people worry about the wrong things.

What am I talking about? In the Oct. 16 issue of Parade magazine, there was a great article written by Steven D. Levitt and Stephen J. Dubner titled "What Should You Worry About." If you didn't read this, I would recommend you hit the Internet and read the entire article.

Investing my clients' money for as many years as I have, I know they worry about this and worry about that. The market has cooled off a little and may drift downward for a while; as usual, I don't know or care what will happen over the next few weeks. However, the media will be putting all kinds of information out for you to worry about -- don't. The economy is slowly improving and the companies I hold in my portfolio are making money and improving their business.

Why am I not worried or don't care? It's not from the lack of knowledge, but from the history of media content. Back in 2001 the U.S. media called the summer of 2001 the "Summer of the Shark." Why? An 8-year-old boy in Pensacola, Fla., had his arm ripped off and a chunk taken out of his leg, a terrible incident. The media continued to talk about this and people were afraid to go in the water, thinking their chance of a shark attack was very high.

Let's look at the facts: In 2001, there were 68 shark attacks and only four were fatal. Between 1995 and 2005, the average number of shark attacks was 60.3 worldwide -- yes, worldwide. The highest was 79 and the lowest, 46. Fatalities only averaged 5.9 per year with a high of 11 and a low of three.

So, was 2001 really the summer of the shark? No, it was more the average year of the shark, but who would have read that story? By the way, elephants kill at least 200 people a year. But that doesn't make a good story either, since elephants are friendly, or so thought of in kids' books and films. Remember Babar and Dumbo? Killer sharks sell -- killer elephants don't.

Another emotion that the media gets us on is being afraid of strangers. Looking at the facts, strangers are not the ones we should worry about; again, our worries are in the wrong place due to emotions that have been created. Here's some facts: Three out of four murder victims knew their assailants. When it comes to rape, it's not the stranger hanging around the corner; about seven out of 10 rape victims knew their rapist. Identity theft is another area where the facts are not what you would think. Almost half of identity theft victims are ripped off by someone they know. A surprise to me was that 90 percent of identity theft happens offline, not on the Internet.

One may be thinking, yes this is true, but what about the big stuff -- like the health care issue or the banking crisis, cap and trade -- whatever you're worried about, these are the big problems. In the early 19th century, they had a big problem -- horse manure. Don't laugh; it was a big problem. In 1900, New York City was home to 200,000 horses, one for every 17 people. Did you know a horse on average produces 24 pounds of manure per day? In New York City, they were dealing with nearly 5 million pounds of manure a day, 34 million pounds a week -- it lined the streets like banks of snow and there were vacant lots of the stuff piled 60 feet high. Talk about a stinker of a problem. City planners were confounded on what to do about the breeding ground for flies and deadly disease. But with human ingenuity and time, the electric streetcar and automobile came to be and the manure problem disappeared. Scientists, entrepreneurs and motivated people rise to the occasion whenever there is a problem, and it gets solved.

So when it comes to investing, keep your head on straight; think about the businesses you own and what they are doing to control costs, increase revenue or how much they are spending on research and development to keep their products on the cutting edge. By all means, don't sell your companies based on some fear of the unknown; you will probably say in the future, I should have stayed put.