Are you one of those many people who dread reading their 401K statements? You have been watching it decline for about 2 years and are wondering if will ever stop. Just about everyone says the market will come back. Brokers say you are in for the long haul so don't worry. Any account that drops to a 50% loss has to go up 100% to get "even" and that is a very difficult phenomenon. If you have an 80% loss as has already occurred in the Nasdaq you would need a 400% rally to get "even". At 90% you have to see a 900% rise to that mythical "even".

Buy and Hold has been preached so long and so loudly that everyone believes it. As Adolph Hitler said when you tell a lie tell a big one. Wall Street has been screaming this one down the throats of investors for so long it has become conventional wisdom. Look at your 401K today and compare it to 2 years ago and tell me you believe in Buy and Hold. Common sense will not allow it.

Every broker has been taught that market timing doesn't work. Yes, they teach them that and they have been good students. The problem is they have had a bad teacher. Within the funds you now own the fund managers buy and SELL many times during the year because there is a time to sell. Selling is the key to successful stock market investing.

A friend mine came to me with his wife's 401K from United Airlines. It is composed of 8 Fidelity mutual funds. The employee can pick any one or more. Since the first of the year six of the eight are down from 3% to 27% (average 10.77%) and the other two were up an average of 3%. The two that are up are fixed income funds otherwise known as bond funds. If you have a 401K, IRA or SEP or almost any mutual funds the only place to preserve your capital during this secular bear market is in a bond fund - a no-load bond fund. Do NOT pay commission for these. And there are many of them.

For years Wall Street has condemned those of us who use market timing. Well, you can call me what you want, but I will have my money when the Buy and Holders are broke.

Stock mutual funds do not work in a long-term bear market. Mutual funds, as we have known them for the past 20 years, are dead. You now have only two choices within your retirement account for your money - a bond fund or a plain money market account. Don't cry that you will only make 5% on your money. Think about the 20% to 40% you will not lose. According to Lipper 99% of U.S. equity funds lost money in the second quarter. I have been telling investors for years - cash is a position.

Enronitis broke thousands of people because they would not (could not) sell as the stock broke down. Don't let 401K-itis break you.