A lot of people have had to rethink their investment analysis since late last year as they’ve watched one “sure thing” stock after another fall prey to bad management, the faltering economy or investor panic.

At the risk of sounding cavalier, my approach to this economic turmoil can be summed up with the joke about the difference between a recession and a depression…

A recession is when you lose your job. A depression is when I lose my job.

Nothing much had hit close to home. Sure, businesses are struggling and many of my friends, family and acquaintances have had to cut back. But thankfully, most people I know haven’t felt too much of an impact.

That was until I received a startling e-mail from a good friend of mine a few days ago…

Investment Analysis 101: A Harsh Reality

I already knew that this guy’s father had enjoyed a successful career as a company executive for years and was now enjoying semi-retirement, spending more time with his family, and consulting for a few clients.

He was also heavily invested in the stock market.

Too heavily, in fact.

Turns out he’d put his money in investments that were highly leveraged and was margined up to his eyeballs. As you can imagine, when the credit crisis hit, his holdings got crushed. My friend reports that his father is all but wiped out and is now driving a school bus to make ends meet.

Suffice it to say that this was a bit of a wake-up call for me. Yes, my friend’s father certainly took on more risk than he should have done. But this isn’t some anonymous person that I read about in the newspaper. This is someone who I’ve known since I was a kid. Someone who is very important to a good friend of mine.

A Critical But Opportunistic Investment Analysis

It served as a catalyst for me to take a look at my own portfolio and make my own investment analysis, assessing whether I’ve taken on more risk than I should have.

For a start, I never buy stocks on margin, so that isn’t an issue. And after reviewing my holdings, I was relieved to find that I have an appropriate level of risk, even during these volatile market conditions.

Throughout the current crisis, the one constant theme that we’ve repeated over and over again is this: Don’t panic and sell off with the crowd.

I know this is easier said than done when you see the stock market take another triple-digit tumble. But selling off blindly isn’t the answer to the problem. We’ve harnessed our “don’t panic” advice with the fact that the current market is presenting us with some remarkable opportunities to actually buy make substantial profits over the long run.

That said, it’s important to stay liquid and be able to sleep at night if the markets slide even lower. So I urge you to take a look at your own portfolio and assess how much risk you have. Do you buy on margin? Are you 100% invested?

Your Investment Analysis Might Prove You Can Take On More

If you do have enough cash on the sidelines and can withstand a market selloff, than I hope you’ll follow me and the rest of the editors here at Mt. Vernon Research.

While we don’t like the current crisis any more than you do, the one bright spot is that it’s offered up one of the best bargain-basement periods in a generation. It’s an opportunity not to be missed - and we’re recommending a steady stream of growth stocks that are now trading at stunningly low valuations.

For example, the blue-chip biotech company I recently picked in the Xcelerated Profits Report could post double-digit returns in just the next few months. Or the more speculative biotech that is on track for a 100% return or more by this time next year. To learn more about these picks in the Xcelerated Profits Report, click here.

On the other hand, if you’re a bit uneasy about the level of risk in your portfolio, be sensible and take it down a notch.

Like It Or Not, This Investment Analysis Is Vital

For the most part, I viewed those hardest hit by the crisis as folks who just got in over their heads - either because they were greedy or trying to keep up with the Joneses.

Don’t get me wrong… while I certainly feel for someone who gets bamboozled by a snake oil selling mortgage broker, or someone who buys a home they can actually afford, but runs into a hardship due to a health crisis, many of the foreclosed homeowners that I read about were people who simply got stuck without a chair when the music stopped. They bought homes and assumed they’d simply flip them to the next person. Problem was, they shouldn’t have been playing the game to begin with because they couldn’t afford it.

It’s rotten that sometimes we have to learn from other people’s mistakes. But ensure that you keep them to a minimum - and don’t make them in vain.

It’s very difficult to recover from a significant loss of capital, as my friend’s father will attest. So let this story serve as your own wake-up call and ensure that you don’t end up the subject of a similar startling email.

Hoping your longs go up and your shorts go down.

Marc Lichtenfeld
Smart Profits Report