You know the drill when it comes to investing sensibly: Be greedy when others are fearful and fearful when others are greedy. Don't panic; don't follow the herd. Be contrarian. The only reason that this advice is effective is because so many people don't heed it. They panic, they sell, they join the lemmings jumping over the cliff.

Consider, for instance, emerging-markets stocks. They've done very well for years, but they've really taken a beating so far this year. Check out these figures:


2008 Return

United States (S&P 500)











Further proving the point, the iShares MSCI BRIC Index Fund (BKF) is down 26% so far this year. Its top holdings recently included Petroleo Brasileiro (NYSE:PBR), China Mobile (NYSE:CHL), and CNOOC (NYSE:CEO), and a host of other big companies based in the Brazil, Russia, India, China (BRIC) regions.

So, what are many investors doing in this environment? They're selling out of stocks in general and BRIC holdings in particular. They don't seem to realize that when the market swoons, it often presents a good buying opportunity. And at the same time, what do they do with their money? Many have moved money into gold. Why? Well, they've seen gold surge in recent years and don't seem to realize that it is near historically high levels and that it may well drop in value. Indeed, year to date, the SPDR Gold Shares (NYSE:GLD) exchange-traded fund is down some 6% as I write this, after averaging 21% annually over the past three years. Over decades and centuries, gold has been a lousy long-term investment.

What to do
Be careful with your money. If you want to invest in gold, read more about it and look for promising gold investments. You might consider gold-focused mutual funds, such as the Vanguard Precious Metals and Mining (VGPMX) fund, invested in companies such as Harry Winston Diamond (NYSE:HWD), FMC (NYSE:FMC), and Barrick Gold (NYSE:ABX).

Remember what we've learned from countless teen movies: The hero defies the "in" crowd. It doesn't pay to follow the crowd. Think for yourself, and look for the most promising investments.

Longtime Fool contributor Selena Maranjian owns no shares of any companies mentioned in this article. Petroleo Brasileiro is a Motley Fool Income Investor recommendation. CNOOC is a Motley Fool Global Gains recommendation. Try our investing newsletter services free for 30 days. We can give you the keys to stock market success. The Motley Fool is Fools writing for Fools.