A Repeat of the Same Old Pattern. It is true. Shopping habits and investment habits are diametrically opposed to one another, for many investors.

Consumption gumption: Your favorite stylish clothier or electronic store has a sale. You shop every aisle, fiercely weighing in your mind your want-it-factor against the original cost and the new saver slogan – 50 percent off. No wait, you think; if this store has stuff on sale, maybe the one in the next mall down the road has an even bigger price reduction. Off you go, burning up gas – cause down the road is really ten miles away. Well, well, their price is 55 percent off, but there is a big crowd queuing up. You grab not one or two but three because they are so cheap! Triumph. You won – what exactly is debatable because in the effort to save, you've spent even more than what you originally intended!

See how easy it is to be lured right in. Still, you love the company, it makes quality merchandise. Even at full price, you are generally happy with what you bought. Two years later, though, unless it is a vintage classic, it is headed for The Bermuda Barn or trashed – having outlived its usefulness, it is thrown away - with no redeeming value. The quest for the next new thing will start again – at what price can I purchase this new 'want' in order to make me happy.

Investing habits: The question can be asked – does it occur to a consumer that the very same things that are wanted so desperately are churned out year after year by reliable profitable corporations? Whether it is shampoo for the salon, makeup for the magnificent, wow for the electronic buffs or just the us basic masses riding transportation, the common uniting fact is that among thousands of items or services used daily, there are large, publicly-traded, corporations producing them.

Publicly traded means there are millions of shares owned by the public: you, me, and everyone in between. There is no barrier, other than cost, to becoming a shareholder, however small, in a publicly owned company. If you have a pension with a stock allocation, you already own small share components of hundreds, possibly thousands of public companies.

Is confidence misplaced in all the wrong places? The paradox of purchasing goods and services versus investing equity into the underlying company lies in comparing the difference between owning equity in the company that makes your favourite electronic or owning the electronic. The package of plastic electronic parts will almost always go down in value, commercially or in your eyes, while the shares of a successful company can go down but more often than not in the long term will appreciate. Why? Your quest for buying the have-to-have-it stuff drives up profitability and the share price.

It is difficult to translate this paradoxical equation in our mind. Maybe we place too much credence into what the financial wizards or whiners say. Investors sold out over the last 18 months indeed after some very well-known advisors recommend that they do so, taking losses rather than face the uncertainty of a possible market collapse. While their confidence in the companies that supply them with the operating things of life was shaken, investors as consumers continued to purchase their favourite brands, every day in every way.

The performance of the brands contained within the S&P index. The S&P 500 stock market index, maintained by Standard & Poor's, comprises 500 large American companies covering about 75 percent of the American equity market by capitalisation. After the Dow Jones Industrial Average, the S&P 500 is the most widely followed index of large-cap American stocks. It is considered a bellwether for the American economy, and is included in the Index of Leading Indicators. Some mutual funds, exchange traded funds, and other funds such as pension funds, are designed to track the performance of the S&P 500 index. Hundreds of billions of US dollars have been invested in this fashion.

Many of these companies, possibly all of them, touch our ordinary lives every day, in the things we buy, consume, use, or save. Companies such as Amazon, CocaCola, Aflac, Caterpillar, Best Buy, Bristol-Myer Squibb, Adobe, Carnival, Chevron, Colgate-Pamolive, Dell, Exxon, Google are familiar to us all. Ultimately, the long-term performance of the Standard & Poors has trended one way. See chart

Mistakes and capitulation over twenty year history Since 1987, there have been three significant market downturns, but each time the S and P Index and the broad market has recovered. A look at these statistics says the truth is pretty plain.

During the latest market recession, that started in August 2007, buy and hold was fashionable dismissed again, as was the possibly-too-old Oracle of Omaha. Now, as the market recovers, naysayers are retrenching. The facts are in, the Oracle has profited but unfortunately, many investors have stayed out of capital markets this year missing one of the greatest rallies in history.

So, what is the better buy? The shopper's bargain delight at the mall, or bargain basement stock prices temporarily undervalued for good solid globally viable public companies. If you had bought those for sale at 55 percent off and held on to them, where would those values be now?

Sources: Wickipedia

Barrington Investments

Bloomberg

Martha Harris Myron, CPA, CFP(US) TEP(UK) JP-Bermuda, is an international Certified Financial Planner™ practitioner. She specializes in independent fee-only cross-border tax, estate, investment, and strategic retirement planning services for Bermuda residents with cross-border and multi-national connections, internationally mobile people and US citizens living abroad.

For more information, contact martha.myron@gmail.com">martha.myron@gmail.com or 735-4720