Expert: Paul Henneman - 11/19/2008

Question
 I am relatively new to investing, but I like the value approach and have read books on Warren Buffet and also books by Benjamin Graham which I think give the best advice for times like these.  These current market conditions are really unsettling.  I've desided to stop trying to pick stocks and instead put my investing on an autopilot in which every month a certain amount of money goes into a financial index fund (XLF) a chinese index fund (GXC) and an oil fund (USO).  Do you think this is a good idea?  I feel strongly that the market will eventually rebound and time is on my side since I am only 23, but I cant help but wonder if the current problem is so severe that it will change the way our financial markets operate.  Do you think its possible that we may never see a DOW 14,000 again?

Answer
Alex,
   Thank you for your question! First, congratulations on thinking about investing so early in life. This gives you a huge advantage to really build wealth by the second half of your life.
   Also congratulations on your overall approach and reading materials. You are well serviced by reading such authors.
   My third and final comment is that you have thought about this, read the appropriate materials, and come up with an investment plan that best fits you. Yes, we will see DOW 14,000 again. It may take two years, it may take 8 years, but the overall cycle of economic growth has only been broken for the short term. The housing crisis will eventually work itself out, and then things will slowly get back on track. My research company expects this to happen in two to three years.
   Index funds are a great way to invest. You will be diversified across the entire industry that the index funds tracks, but only have to buy that one ticker symbol. I also like that you have selected several relatively uncorrelated index funds. As your investments grow, you may want to add a few more, but for what you are trying to accomplish, good job. For example, an oil fund is good, but an additional overall energy fund may be of interest. Sources of energy may change in the coming decades.  Health care is another area that could be of interest.
    I generally don't get the opportunity to simply say I agree and offer little advice, but there you go.

Please do not hesitate to follow up with me if I can be of any additional service,

Sincerely,
Paul Henneman
President
ValuEngine Inc
www.ValuEngine.com