Everything is a risk and has a cost in life. There is an opportunity cost for people who are unwilling to take investment risks, and that is the loss of the opportunity to make money. This is most easily applied to business and makes more sense for most people vs applying it to stocks. In business you have the possibility of making it more successful or less and if you do not take certain risks, such as spending money in advertising or hiring more people, etc. then you run the risk of not succeeding, but you also run the risk of failing and losing money if you do take the risk. So you have to weigh it out, because you can’t stay stagnant.

As for the economy, the current problem is the direct result of unchecked greed and poor laws. It was very evident early on that this was an untenable situation. People should not buy what they can’t afford it’s true, however, the current situation was created by banks and people who saw an opportunity in the change to lending laws. They created a ponzi-like scenario that stretched lenders who agreed to lend because they could sell off derivatives of the loans they issued, therefore removing themselves from danger, or so they thought.

Let me note also that there are people who, in fear, sold out of their retirement and savings accounts only to find that inflation has devalued their money as much or more than the market. The problem with inflation, it rarely goes the other direction whereas the stock market tends to rebound.

I recall a conversation I had a few months ago with a fellow. He told me rather gleefully and smugly how he had just received a call from his investment advisors assistant inviting him to a seminar to talk about investing in turbulent markets. He sarcastically asked the poor girl if she was going to show him how to make 30%? Of course she did not kow what to say in response and then he launched into his reasoning of how the market had lost 30% in the last year and since he had his money in cash, he actually made 30+% in comparison. On hearing this, I knew he was more the fool than I thought him to be. For one thing, I knew he had been in cash for the last 5 years, and had lost out on all the opportunities that others had made money at. He had also scored a big negative in terms of the inflation battle, so he really lost money all the way around. His logic though, was his biggest losing point. He operates from a fear position and that will cost him many opportunities. We must remember that thought there are many people in pain right now, alot of those same people made a lot of money in the past couple of years and may own several homes, etc.

The biggest thing in investing is to manage fear and temper greed. If you can do those two things, as well as be patient, you will succeed.