Tuesday is money/politics day on invisibleblog.com.

by Mark Simmons*

It’s official. The economy is in a recession and the stock market is in bear territory. If you haven’t checked your investments recently, you may be in for a shock. This holds true whether you are a seasoned investor, a novice or an investment professional. No one is immune to the market’s volatile nature and with the falling dollar; rising price of oil and mounting political forces, there seems to be no end in sight. If it feels like it’s time to throw in the towel and save what you can. Resist that urge. It would be the biggest mistake you can make right now.

The most important point to understand is that we’ve been here before. The beauty of the financial markets is that they have history. They offer quantifiable history and strong behavioral patterns. What does this mean to the average investor? You can expect the market to repeat past patterns of behaviors. Though it offers no guarantee of repeating the exact actions of the past, this one fact holds true of the market: It moves in cycles and a reversal is inevitable.

The current bear market may seem like an endless abyss, but that’s only one side of the story. Now is the absolute best time to buy hugely undervalued stocks. It does not matter if you use your 401k, pick stocks yourself or invest in mutual funds. There is opportunity everywhere!

Solid companies are devalued because of the market’s negative sentiment. It’s important to understand that just because a company’s stock price is down does not make it a bad company to invest in. The market has a way of significantly impacting a stock’s price regardless of its true underlying value.

What does this mean to you? It is time to buy. Warren Buffet, the Oracle of Omaha, has a very simple methodology when it comes to investing in any company. He analyzes their performance and financial standing, assesses their competitive viability, reviews management and the company’s prospects for growth. Buffet does not invest if he doesn’t believe they have a solid business plan and the ability to grow. The end result is that he buys great companies at discounted prices that end up growing his vast portfolio.

I’m not saying to go and take cash out your savings to invest in the market if that wasn’t already your plan. I am saying to stay the course. Continue investing on a periodic basis, if that’s what you’re doing. Your 401k is a great way to save for retirement as you earn a positive return simply because of the tax savings of each contribution. As you invest each month in your 401k, mutual funds or individual stocks, you are able to dollar-cost average. This means that your equal monthly investment will accumulate more shares as prices decrease and less shares when prices go up. The cost you pay for the aggregate shares is averaged by the price fluctuation. Using the assumption that your fund managers are selecting solid companies, you are able to buy more shares at a lower cost in the current market. When the market inevitably turns, you will be able to profit from your patience.

The current market is definitely not one that we welcome, understand or feel at all comfortable with. However, the savvy investor doesn’t panic, they exploit opportunity. Now is the time to buy great companies at bargain basement prices. Do yourself a favor and stay the course. You’ll get rewarded in the end.

*Mark Simmons is a former financial investment professional and currently an avid day-trader.