FINANCIAL RAMBLINGS FROM THE ROCK by Nathan KowlaskiFor many cautious investors the latest rally has been painful. The often quoted reams of negative “potential” scenarios have not materialised and bears have been pushed back on their heels. Stocks have more than doubled from their 2009 bottom, and are up nearly 30 percent from the October 2011 panic plunge.For those who sat out this latest surge because they knew stocks could only go lower, seeing the charts move from bottom left to top right has probably come as a great shock. Now, however, the folks on the sidelines are left with a real dilemma: Is it too late to join the party? By jumping in now are you piling in at the top? And if you don’t, are you doomed to earn nothing on your cash as the market continues to rally? What does a sound and prudent investor do at this stage?My first piece of advice is to stop trying to time the market in the first place. Benjamin Graham, the author of “The Intelligent Investor” wrote “we have retained a broad leeway between 25 percent minimum and the 75 percent maximum in common stocks”. In other words it makes little sense to be all in or all out in the first place.I have seen very little evidence of successful investors that solely time the market. The average investor would do better focusing on investing over longer periods. Valuation matters. Instead of timing the market and letting emotional headlines sway your resolve, know what you are buying and buy it cheap.In my article dated September 12, 2011 “Evidence that the economy hasn’t fallen off a cliff” I wrote: “A great deal of bad news has already been priced into stocks with select company securities already reflecting very adverse future macro deterioration.”On that day the VIX (Wall Street’s fear gauge) closed at 38.59 versus an average of 20.5 since 1990. The S&P 500 was trading at 13 times earnings versus an historical average of 16 times. The market was pricing in a huge discount, in other words, the price was right. The market has climbed over 17 percent since then.My second piece of advice is to stop looking backwards. What has happened has happened. We can’t get in the time machine and invest. We need to take stock of our current investment opportunities, using the information available and invest looking forward. For example, when the market peaked in April of 2011 the price to earnings ratio was about 15.6 times. Now it’s about 14.1 times. Earnings have continued to grow over the last year and stocks have not kept pace with this growth. One could argue stocks were actually ten percent more expensive in April of 2011!Great, you say, but now what? Investing is about taking intelligent levels of risk (that are appropriate for your personal situation) and not waiting for a “perfect day”. Remember that what you buy and the price you pay are the most important decisions, not the headline news.It is this understanding that gives you the courage to wade into the fray when others are abandoning all hope and leaving bargains on the table. At this stage there may be fewer bargains but there are still some. By having a diversified investment plan you will never be “all in” or “all out” and your pocket book will thank you for that. It’s never too late to start.Disclaimer: This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources deemed by Anchor Investment Management Ltd. to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. Past performance is no guarantee of future results. There is no guarantee that any forecasts made will come to pass. Reliance upon information in this material is at the sole discretion of the reader. Investment involves risks. Readers should consult their financial advisers prior to any investment decision. Index performance is shown for illustrative purposes only. You cannot invest directly in an index.Nathan Kowalski, CFA, is chief financial officer of Anchor Investment Management Ltd.