Thanks to Bizzywomen.com for submitting this article.

Over the past 14 months, drastic market falls have caused many investors to lose significant portions of their savings. The U.S. market has fallen by more than 40%, while international markets are down by 60% or more in many cases.

In this scenario, one of the questions that I am most frequently asked is, “How do I make my money back?” My answer to this question is simple - don’t try to make your money back. If you try, chances are that you are going to take unnecessary risks and end up losing even more money. For this reason, the best advice may not be something that many investors want to hear. It is probably better to forget about the past and concentrate on the future. While the markets are getting hammered, stocks are selling at a discount. Although no one can predict when the market will hit bottom, buying at a 40% off discount is something that rarely happens.

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Asset Allocation

Creating your asset allocation, or the mix of stocks, bonds and cash in your portfolio, is the single most important task that an investor has to face. Many studies have shown that the proportion of stocks, bonds and cash held in a portfolio has a greater effect on its returns and volatility than the individual investments that are chosen.

That is why after assessing one’s investment goals, it’s of the utmost importance to create an allocation that can help you achieve the aforementioned goals. Once you have fixed your asset allocation, you can start considering what to buy. “Be greedy when others are fearful,” is one of investor extraordinaire Warren Buffet’s favorite sayings. Many economists believe that the United States is in the midst of a recession. While this does not sound good, there may be a silver lining for investors. Though you need to always remember that past performance is no guarantee of future returns, consider this: According to a report in Smart Money, “Stocks tend to rebound before the economy does. Over the past nine recessions, the S&P 500 has gained an average 13% during the second half of the downturns and another 13% the year after they ended. Even during the Great Depression, the S&P rose 33% from the market’s trough to the end of the recession. And while it’s folly to try to predict a bottom, with the market down 40% from its 2007 high, it may not be far away.”

Buy Low/Sell High

During more stable times, clients ask me which stocks I think may have big upside potential. Usually, they are looking for small companies that have the potential to move up rapidly. I like to refer to this as “being a hero.” These clients expect me to wade through loads of information to pick out a company that no one has ever heard of. (Whether that is realistic or not is for another column!) In today’s climate, however, there is no need to be a hero. It is not necessary to speculate on risky companies. It is enough to look at large companies that continue to pay or even raise their dividends as a place to start. These are usually companies that make products that we all use in our day-to-day lives. For example, come what may, consumers are still going to use shampoo, toothpaste, soap, and other necessities.  Obviously there is no guarantee that your money will be doubled within the next week. But if you have a long-term investment horizon and you can withstand continued volatility, then investing in stocks now will have the potential to reward you in the future and help you rebuild some of the wealth that you have lost.

With the current market volatility, it is worthwhile speaking with your financial adviser to make sure that your portfolio is well designed with your financial goals in mind. Then, if your financial plan allows for it, have a talk about trying to take advantage of a once-in-a-lifetime opportunity.

Please see our Disclaimer HERE.

Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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Aaron Katsman
www.IsraelNewsletter.com

Perrigo (PRGO) a company that develops, manufactures and distributes over-the-counter and prescription pharmaceuticals, announcedthat they received approval from the FDA to market for a Nicotine based smoking cessation gum.

This is another in a long line of wins the company has experienced of late. Shares of Perrigo have bucked the market trend over the last 6 months and have continued to move sharply higher. Commenting on the news, CEO Joseph C. Papa said, “This approval of orange-flavored, coated nicotine gum extends our leading store brand position. Our expanded range of smoking cessation products also includes coated mint-flavored gum, coated fruit-flavored gum, uncoated gum and lozenges.”

The estimated market for over-the-counter nicotine gum and lozenge products is around three quarters of a billion dollars. So this is clearly a big potential earnings  driver for the company.

I have never smoked so I have no idea what it’s like to try and stop. But from what I understand, the hardest part is trying to break the cravings from nicotine addiction as well as certain activities that you do when smoking. That those activities ‘call’ for you to smoke.  The nicotine gum helps negate the cravings associated with smoking, freeing you up to work on your ability to do certain activities without smoking.

As someone who chews gum like it’s going out of style, but also can’t refuse a cheese danish, I hope they come out with a gum, that helps cut the craving for eating and helps you to lose weight.

Disclosure: Author’s fund has a position in PRGO, fund has no position in any other stock mentioned as of 4/25/08.

Please see our Disclaimer HERE.

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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.

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