No Limits Ladies.com

I was talking to a loved one on the weekend about investing. He has a friend who had a solid investment plan. He stuck to that plan for the past five or so years and did well.

Then the stock market tanked. And tanked. And tanked.

Yes, the market going down was in his plan but he forgot that fact. He panicked. He sold. He tried to make up losses by speculating. He did wild and crazy things because he was stressed out and worried.

He lost money. Big time. He's at the point of bankruptcy.

Honestly, this is the reason I have a financial advisor. I can draft my own financial plan. I can figure out what to buy and sell. But I can't seem to control my own emotions. I need a rational person to bring me back to my plan, to remind me that the downturns are built into it, that this too shall pass.

Because if I don't, I start to trade on emotion and that ain't investing, it is gambling.

I'm going a little media crazy. Every channel on tv is talking about 2008, every blog post seems focused on the past. I don't care about 2008. Why? Because I'm looking forward to 2009 and I'm liking what I see.

What do I see?

Change.

Now, change, good or bad, is often scary. It means working outside comfort zones, reacting to new situations, testing out new skills. No doubt about it. Change is stressful.

But change creates opportunities and I'm thinking we're looking at once in a lifetime opportunities in 2009. Do I know what they are? I have hazy ideas of some but nothing I'd put down in a post. Plus I'm horrible at predictions (especially about which way the stock market will move).

That doesn't matter because the impossible task of predicting the future is not as important as recognizing opportunities when they come along. Keeping an eye out for them. Realizing that opportunities are often disguised as disasters (and we will have those in 2009 also, I guarantee it). Adjusting our systems, our resources, so we can run with the opportunities once they present themselves. Being flexible.

2009 is going to be a great year for building wealth.

2008 was a tough year for a lot of us. However, it also taught some valuable lessons. These lessons are only valuable if we remember and learn from them.

Here are my top 5 investment lessons learned in 2008…

1) Cash Flow Is King
When the market took a dumper, I was still getting paid dividends or distributions on some of my stocks. Although I was pretty much fully invested, I had investment and employment income to take advantage of the bargains in the market. On the other hand, buddies who needed cash had to sell during the lows. Big ouch.

2) Diversification Is Necessary
Some of the companies I owned cut or completely eliminated their dividends. That happens. Sometimes out of the blue. But by holding a few companies, I averaged out okay. I had income to pay for expenses (if I needed it) and didn't have to panic.

3) Do My Own Homework
My financial advisor talked me into a resource stock. I don't know anything about resource stocks. Being swamped with another project, I asked if the balance sheet was solid and was told yes. A few months later, the resource company got in a serious cash flow shortage. They cut dividends to nothing. I then looked at the balance sheet. It wasn't solid then and it certainly wasn't solid now. A junior jammer investor could have called the dividend cut. It was my own fault for not doing my own research. These are MY investments, MY responsibility. No shortcuts.

4) Once I Hear SEC Investigation, I Should Sell
The SEC doesn't take public announcements of investigations lightly. If they announce they are looking into a company, I should sell 'cause it is for darn certain they have a solid case. That happened with one of my stocks and I held on way too long. Finally sold it at a fraction of where it was on the day after the announcement.

5) I Suck At Calling A Bottom
Okay, I did know this before but it got pointed out to me once again this year. Every time I thought quality stocks couldn't get cheaper, they did. I don't regret buying in because with each buy, I felt I was getting a bargain, but… jeepers, it made me look like an idiot.

There are many, many more, but these are the ones that I feel will add most value to my portfolio going forward.