Warren Buffet : "The companies that were good companies the week before the tragedy are still good companies today. I won't be selling, rather I'll be doing some buying on the price dips."
Barton Biggs : "I believe we are very close to reaching a bottom in the markets, by all measures. I think technology, telecom, and even some of the battered insurers and financials will do well in the long term."
That last statement is a real killer, I have NEVER heard him recommend tech or telecom ...
There are tons of good deals out there on quality companies. But there is also still much uncertainty with regard to the near term. As such, my recommendation would be:
#1 - Decide on how much money you have to invest. This should be money that you do not need access to, for at minimum, 5 years. The longer your investment time frame the better.
#2 - Allocate the total among equities (stocks) and cash, according to how much risk you are willing to tolerate. The longer your time frame to invest, generally the more tolerable the risk.
50/50 stocks to cash would be high risk
65/35 would be medium
75/25 would be low
IMHO, at the markets' current levels, you should be at least 60/40, maybe 65/35. Despite the appearance otherwise, the pros are quietly increasing their % allocated to stocks.
#3 - Diversify, diversify, diversify. Again allocate your total to spend across several sectors.
20/20/20/20/20 - Tech, telecom, healthcare, financials, other (select cyclicals & raw matls, energy, retailers, etc.) might be an example.
If you do not have large amounts of money to invest, you might consider specialty index funds which can be bought that focus on certain sectors. For example, You can buy one which is a "basket" of 20-30 semiconductor stocks, or instead one that focuses on networking and bandwidth. Same goes for healthcare, financials, just about anything you can think of. The advantage is that you can own a piece of 20-30 similar companies, but your money is not all riding on one, which is obviously riskier. And these funds are almost always equally weighted, ie., if there are 20 companies in it, each company represents 5% of the fund's total dollars. These funds sell at $10 per share at their original series issue, with new series being issued usually on a quarterly basis at least. Your series' shares will trade at a price either above or below the original $10 price, depending on what the markets (and thus the stocks held in your fund) have done since its issue date. For instance, if you looked at a series issued 08/01/01, right now its price is probably down 35-40% or more, depending on the sector the series is in. So you can buy it for maybe $6.50 instead of the original $10 price.
#4 - Practice dollar cost averaging. No matter what you buy, be it stocks, or funds, or a mix of the two, do not buy all at once. If you wanna buy 100 shares of Intel, buy 25 now, 25 the next big sell off in a couple days, 25 again at a later date (such as when all the tech companies report Q3 earnings - I think this is when the market will hit the rock bottom), and the final 25 just as the market begins its next big run up.
#5 - Have patience. There is a lot of cash money out there sitting on the sidelines, and it is in the hands of the pros, such as those who run funds, etc. Remember, these guys manage funds and the like which are supposed to be based on equities, not cash. Eventually they will be buying back in to the markets to reestablish their portfolios. They are already doing it now to some degree, but they themselves practice #4 above. And when the market does finally hit bottom and builds a base to rally from, it is going to be a big rally. I'm not talking about some one day phenomenon, but rather you will see a stair step raise that over a 12-18 month period amounts to at least 20%.
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