Now What?

Apparently the market can be irrational longer than anyone can imagine. This is exactly what is happening now. While fundamentally and technically everything is pointing towards a sharp and significant correction at least for a short period of time, the market just refuses to budge. The market is testing one's will and determination as well as patience. I'm just adding more and more positions to my panic trade, i.e. VXX. I'm pretty sure I will prevail eventually!

If you have a lot of cash, what you should do with it? Saving at the bank? It is almost like a joke to park your money in any saving account given the near zero interest paid now. By the way, if you really want to "save" your money in the bank, I'd highly recommend one of the best online banks, EverBank. It has not been involved in the mortgage mess at all and it is very safe. Relatively it has paid a high interest (over 1%). You can check the safety of any bank at this site (http://www.bankrate.com/rates/safe-sound/bank-ratings-search.aspx). Just compare your current bank with EverBank to see which one is safer and better. I'm not receiving any commission by recommending EverBank. I just like it.

Will I recommend to invest in stocks? Yes and No, depending on your timeframe and your situation. As I alluded to above, at the moment it is a very dangerous and risky period. I expect a sharp market correction any time. Regardless how good a company is, its stock price may be brought down in a shaky market. Personally I don't want to buy any stocks right now as I expect a better price will come later. On the other hand, if you have a long timeframe and do your home work, there are plenty of solid companies with a great and dominant business and an unbelieveable moat but a very cheap stock price. More importantly, many such companies pay consistently increasing dividends, which are much better than the interests you may get from your saving account. Actually dividend is one of the secrets for successful investment, but it requires a long-term commitment. If you haven't invested much, it may not be a bad idea to start to put some money into work by buying such good stocks. I'd advise to use the dollar averaging technique to gradually establish your positions for better prices. For example, if your final position for a stock is 1000 shares, you may buy 200 shares every several weeks so that in average you may get a much better price than simply buy all the 1000 at one time point. Among many great stocks, I'm really interested in Microsoft (MSFT/dividend yield 2.5%) and Intel (INTC/dividend yield 3.2%). Great business and safest companies but beaten-down share prices. Even in an overall market correction, I think their prices will not drop as much as other stocks. You can sleep very well with such companies. Another company I become more interested in lately is Eli Lily (LLY). It got a big hit in the last several days due to a significant setback in a highly expected diabetes drug Bydureon, which got delayed in approval by the FDA. When a good company got some short-term headwind and its stock price got a hit, it is actually a great time to buy the stock. Eli Lily is also paying a huge dividend at a yield of 5.4% at the current price (around $35). I think it is a very safe company with a great dividend. If you know how to play with options, you may sell its call options (no risk trading) to juice your monthly income safely with such stocks. Suddenly you may be looking at 15-20% income plus any stock price appreciation, if any. So do your homework.