Outwitting Economic Chaos

If you're trying to read the economic tea leaves so you can adjust your investments accordingly, forget about it.

That's the advice of Ric Edelman, one of the country's best-known financial advisers. Nobody knows when the stock market will resume its march upward, he says, or when the economy will improve.

"So forget about what you think," Edelman says bluntly, because it's irrelevant. Making investment decisions based on unknowable events is "the beginning of disaster."

Your financial strategy should look out over several years, not several months, says Edelman, the host of radio and television programs on money matters and the author of several best-selling financial guides, including the post-Sept. 11 book, "Financial Security in Troubled Times: What You Need to Do Now" (HarperCollins, 2001).

Instead of worrying about near-term market fluctuations, he says, focus on your long-term goals: Are you saving for retirement? Are you already retired and in need of investment income? What is your life expectancy?

"Once we understand the goal, we can come up with the investment strategy," Edelman said in an interview with the AARP Bulletin.

In his supersized office overlooking a patch of woods in Fairfax, Va., Edelman casually shuffles a Slinky from one hand to the other as he discusses the market's recent gyrations. "What Wall Street doesn't like is uncertainty," he says.

The fallout from Enron Corp.'s bankruptcy, in which shareholders and employees lost billions of dollars, has fed the uncertainty by raising fears that more Enrons may be on the horizon. "Right now Wall Street is spooked," Edelman says. Yet, he notes, the market has weathered many crises and has always bounced back, typically within months.

With this in mind, he offers a favorite metaphor: Investing is like a road trip, and you approach both the same way. "Will the fact that you know you will hit a red light cause you to never take the trip?" he asks. "No…you wait for it to be over, and you continue on your trip."

Thus when the market hits a red light, you don't sell, Edelman says, because you are carefully invested for the long haul. "All you've got to do is two things: First, invest. Second, stay invested."