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Now might be the best time to invest

Posted: January 14, 2009 10:37 p.m.
Updated: January 15, 2009 4:55 a.m.
D. Frank Norton D. Frank Norton
D. Frank Norton

With the real estate and stock markets in meltdown mode for the past year, there is real financial panic and despair permeating the air right now.

Perhaps it is a good time to take a step back and rid ourselves of this emotional hysteria for a moment and consider adopting a successful investment approach used by a pig farmer down in Texas.

Introduced in a 1978 Fortune magazine article written by John Train entitled "How Mr. Womack Made a Killing," our stock-picking farmer was a successful investor of the time who had a simple formula.

He waited until the news was full of doom and gloom about how the market was falling and there was still a long way to the bottom; he then bought about 30 stocks priced low (under $10 per share with good price/earnings ratios).

He sat on those stocks for three or four or more years until the news was full of how the market was booming, setting new records and sure to go much higher. He would then sell out and go to cash the whole portfolio.

One particular passage of this article stands out: "Mr. Womack never seemed to buy a stock at its bottom or sell it at its top. He seemed happy to buy or sell in the bottom or the top range of its fluctuations."

Looking at our own particular economic and financial situation right now, I would suggest that we are finding ourselves in a similar predicament: Both real estate and stocks are at multi-year lows with continued forecasts of continued severe declines in both investment arenas.

I have heard numerous comments that I would never again invest in stocks and/or real estate.

Maybe, just maybe, we should follow the lead of this investment-savvy pig farmer from Texas and move back into both stocks and real estate.

Yes, we may see another 10 percent plus decline in both arenas, but several years from now, we just might find our newly created portfolios significantly up.

Some food for thought as we begin this new year.

D. Frank Norton is a money manager and financial planner in Santa Clarita. "It's Your Money" appears Thursdays and rotates between a handful of the Santa Clarita Valley's financial professionals. His column represents his own views and not necessarily those of The Signal.


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