NoBoB, I agree with you. But at the same time, talk like that frightens me. Part of it is my upbringing.
Because I've resolved to be more active in the forums, this might be a good time to share the genesis of this morning's post on investing in a bear market. What I'm about to paste below were my original thoughts. These still
may come back as a new entry, but you can see their rough form here:***********************************
Peak oil. Housing bubbles. Bank failures. Stock market crashes. Unemployment. Rising inflation
One year ago, the stock market was at a record high
. On 09 October 2007, the Dow Jones Industrials closed at 14,279. Last Friday, the Dow closed at 8451
, and there's a good chance it will drop even further.
Unsurprisingly, my inbox is filled with e-mail from people who wonder what they should do. Here are some typical questions from readers like you:
- "Originally we had planned to open Roth IRAs this weekend, but with the stockmarket being so unreasonable, we have lost our confidence. Wouldn't it be wiser to leave the money in our savings accounts for several more months?"
- "I am 30 years old and since reading your blog, I realize how important it is to get an IRA fired up. However, now that I'm financially ready, the market meltdown has confused me completely. Should I hold tight and just keep saving while I see how this rides out?"
- "I have two 401k plans. However, the last time I looked at my quarterly reports, I noticed I am losing money. I know that the US economy has been pretty bad lately, but is there anything that can be done or planned for?"
These are fantastic
questions. Unfortunately, there are no fantastic answers. Nobody knows what the market will do. Nobody. Anyone who says they do is full of crap. There are scores of talking heads on the television, and each has her own opinion. Some of them are predicting financial armageddon
. I don't listen to them. Every
time this country enters a period of economic turmoil, every
time the sock market declines, every
time there's a recession, every
time inflation rears its ugly head — every
time these things happen, the doomsayers sound their [dreadful] alarms. Every
time the storm clouds gather, there are those who proclaim it's Noah's flood.
During the early 1980s, my father was one of those who thought civilization was headed for collapse. (His fear was [tinged] with a touch of nuclear winter — that's something missing from today's crisis.) Though he slogged through the 12% unemplyemnt rate, he managed to scrounge enough cash to buy a few gold coins at $500 an ounce (coins he eventually sold at $350 an ounce). He drove the family to Vanderhoof, British Columbia
, where he considered purchasing a house on the outskirts of civilization. To my father, the economic crisis of the early eighties was every bit as real as our current crisis.
I'm not worried about a stock market crash. I have 20 years (maybe 25) before retirement. I'm happy
to see a stock market decline because it means I can buy in cheaper.
If you were willing to buy stock a year ago, why wouldn't you be willing to buy it now? If you weren't
willing to sell when the market was at 14,000, why would you sell when the market is at 9000? Your objective is to buy low and sell high — not the opposite.
I recently took as much money as I could it and pumped it into FFNOX
. I bought in at $24.20. Its current value is $20.01. It's down 17.31% since I bought it. So what? If I had bought it a year ago, I would have paid $32.71. If I get a chance to buy more FFNOX in the next few months, I will. Yes, it's scary to buy as the market is falling, but I know that I'm purchasing a broad-based diversified index fund. And I believe that the market will
The fundamental rule is: Basic personal finance skills are even more important when times are tough. Make the tough choices now, do what is right, and you can prepare yourself for the future.
Warren Buffett: "Be fearful when others are greedy, and greedy when others are fearful." Others are fearful right now. Maybe it's time for a little greed.
know your risk tolerance, and make your investments accordingly. If this market scares you, you may need to adjust your asset allocation. You must
diversify. You must
educate yourself. Often, fear is a product of ignorance. When we don't understand something, it scares us. But ignorance is easily overcome with education. If the market meltdown makes you anxious, I urge you to do some reading. You must
filter out the media noise. You must
have a plan. Index funds or individual stocks? Lump sum investing or dollar-cost averaging?
I've covered this subject several times in the past year. I will continue to cover it as long as Get Rich Slowly readers have concerns.****************
Based on reader feedback that I've been too "personal" lately and not "tippy" enough, I morphed the post into a summary of sound investment practices. I'd still like to bring back this doomsday stuff, though, and talk about my history with it, and how to deal with it.
What I would really
like are examples of other doomsday predictions from, say, the 1970s to the present. Surely there must be lots of great examples online from after the tech bubble bursting. I'd love to be able to say, "Look. Here are some actual examples of people proclaiming the end of civilization." I know my father had his favorites, but he's not alive to ask anymore. I'll have to do some research.