Question: Long-Term Investments

Recently a subscriber sent an email over to me asking the following:

I’ve just filed my tax return for 2008 and I’ll be getting back some money from Uncle Sam. Each year I stash my tax refund into some long-term investments to save for my kids’ college tuition…Since I won’t be using this money for the next 15-20 years, can you recommend some long-term investments that once this market recovers will provide me with a descent return?

Answer: Probably your best place to start is our page dedicated to long-term investments – our Asset Allocation Section. There you will find a number of stocks and ETF’s worth investigating and even putting your money into.

But generally speaking, the problem with the current market isn’t the fact that there aren’t pleanty of cheap and oversold stocks out there, the problem is, that when all is said and done, we really don’t know who the survivors are going to be. Now when the market finally does turnaround, there’s not much doubt that stocks like Walmart (WMT), Nike (NKE), Disney (DIS), Apple (AAPL), and others will still be around, but the problem is at what price will they be around at.

There is still a strong possibility that this market has another leg down, or that we see another particular industry collapse much like the financials and home builders did. If that is the case, your long-term investment could be worth pennies on the dollar before things ever really do turnaround.

So I’m not saying that you shouldn’t invest long-term, but use our asset allocation page for how to spreadout your investments among different classes (not just industries alone). Investing in one or two stocks at this point in the market for the long-term with no exit strategy, only that you want to sell it in 15 to 20 years, isn’t the smartest thing. So use some caution, and stay away from the mentality that you can hit a homerun with some “too-cheap-to-be-true” stock.