There can be no doubt that for investors 2008 started badly and in many cases became far worse. For some it has been a nervous time and for others it has been a complete disaster. Values have fallen and if you have borrowed money to finance your shares you are probably feeling some anxiety. I am certainly one of those persons.

From my research there are few stocks or funds, not to mention entire markets that have not taken a hit since January 1 (most since about mid November 2007). My company karma financial research.com has undertaken significant research over the past 6 weeks and it is difficult to find a fund or stock that has improved its value from the 2007 results.

What amazes me about the market slump is the wide variety of opinions in how the market will preform for 2009. On the negative side we have Professor Steve Keen from the University of Western Sydney predicting that we are entering a depression with massive 10% plus unemployment and the world economy will take 10 years to recover. On the other side we have “experts” saying that the governmental bail outs coupled with the protection of bank accounts will slowly lead to a recovery. It is hard to know who to believe.

Nonetheless, I really feel for the persons (and families) who have, or about to lose their jobs through no fault of their own. I can only begin to imagine (and hopefully will never experience) the emotion and financial pain of losing your employment. With all this apparent ‘doom and gloom’ and negative future forecasts, it difficult to envisage the next time of economic bliss. However, we need to understand that the downturns do happen and the capitalist world survived the 1973 oil crisis and the 1987 stockmarket crash. History indicates that after a slump there is a strong rise. May be there are right!

I wrote in May 2008 that we should hold our nerve and sit tight. There is no doubt sitting tight is hard and watching your equity evaporating is painful and even gut wrenching. However, there are several stocks and funds that have reduced in value quite significantly and are really cheap. It is interesting to note that Warren Buffet is investing in the market, whilst the rest of us are panicking and selling. It is certainly food for thought. In running against the tide, Buffett once again is backing his own ability and experience. He and others are picking up bargains and will potentially make handsome returns whenever the panic stops. By that time the panic sellers will realise it is too late and they will have paid a high price.

If you can it is a good time to hold on to you stock, remember you have on lost cash if you sell today for a lower price than you paid. By not selling you have only lost on paper not in cash. Hold your nerve if you can as 1974 and 1988 will arrive.

Tags: mortgage, finance