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But lurking just beyond the recesses of your capitalist greed lies an even more destructive force. It is an emotion that makes you hesitate, that calls you to inaction, and that constantly reminds you of every investing horror story you've ever heard. That emotion: fear. Fear is, in our opinion, the more dangerous of the two emotions that plague most investors.
The desire for profit encourages us to invest in the stock market, rather than leave our savings tucked safely away in low-yielding investments. Capitalist greed compels us to take risk, to seek ownership, and to share in the profits of the great businesses of the world. Given enough time and proper diversification, investing in the more volatile arena of stocks is always the right thing to do. (It is short-term greed that usually causes the big problems.)
Fear, on the other hand, cripples the average investor and leads to inaction. Fear often causes large sums of money to languish in money markets or CDs. As a result, real returns, after taxes, barely keep up with inflation. Or fear may lead to far too much invested in corporate or government bonds. Either way, you lose the energizing power of double-digit annual compounding that stocks have produced decade after decade. (U.S. stocks have averaged 9.1% for 128 years since 1871 and 12.2% for the 50-plus years since World War II.)
So ask yourself: are you ready to face your fear, push past anxiety, and embrace the possibility of sector investing? Are you willing to risk a few strikeouts along the way as you swing for the fences? Conversely, are you interested in diversifying part of your portfolio into real estate, utilities, and natural resources -- sectors that often zig when the broad market zags? If so, we invite you to join us as we journey together down the path of intelligent, risk/reward sector investing.
In the following pages we hope to answer most of the questions that you, as a beginning or intermediate investor, want answered. We make no apologies to the advanced or professional investor; this book is not written for you. We opt for a fairly basic approach, assuming no prior knowledge of sector investing or complicated terminology.
Part One (Chapters 1 through 3) will help you get started. In Chapter 1 we explain what sector investing means, define key terms, and provide a framework for you to build a personal basic investing philosophy. Though many professionals don't include international investing as a specific sector, we explain why we do. Chapters 2 and 3 describe the pathways to investing in various sectors -- using mutual funds and/or buying individual stocks -- with emphasis on the practical steps of each method. Part Two (Chapters 4 through 10) provides you with a complete toolbox for sector investing.