It is almost impossible to be oblivious to the problems currently plaguing the world's economy. Every day on the news or in the paper the headlines proclaim recession, job losses and other issues that induce stress and anxiety. Even if you are lucky enough to have a job or economic security, you most likely know someone that is not as fortunate.
The recession of a century is touching everyone. It seems an economic tsunami is washing up on the shores of every country, so how should you deal with those feelings of anger or fear that well up with each new headline? What should you be doing with your money right now? I have been asking myself the same questions.
With 28 years now of work experience in personal finance, I have nothing to compare our current crisis with. We are in uncharted territory in many ways, so the old advice of "stay the course" and everything will work out may not be wise. Each one of you is different. You are in different stages of your financial life and have different objectives and needs, so you need to keep your own situation in mind when formulating a plan going forward. The operative word here is forward as looking back will only cause more anger and fear.
In order to evaluate your finances without such strong emotion, you must be realistic about what you need to do with your money in the near and not-so-near future. Having worked directly with people and money for so long, I know feelings run deep. Money means security, freedom, control over your own destiny or the destiny of others. It can open the floodgates of emotion from the ecstacy of winning the lotto to the despair of losing your home to foreclosure.
In my last column, I had advised people who did not fully understand the subprime mortgage problems at the heart of the crisis to watch "House of Cards" replaying on CNBC. As I watched myself and found the veins in my neck popping out as my face turned red yet again, I realized something. I too was having difficulty separating my emotions from logic. Even Alan Greenspan admitted that he did not fully understand the risks being taken in subprime securities, nor did he know the scope or size of that market at its largest. It amazed me that the chairman of the Federal Reserve could be clueless to what was taking place, but it put things into a different perspective. If Alan Greenspan did not know, how could I have known and how were you as investors to know? Suddenly, I was not as angry.
The thing to do now is concentrate on the best strategy going forward regardless of how we got here. It is important now more than ever before to be an educated investor. If you work with an adviser, know his or her experience and credentials and make sure they listen to you. If you tell them that preserving capital is your main objective and find yourself in a bunch of international mutual funds or stocks, then your objective is not going to be preserving capital. If you handle your own investing, use the tools available on some of the big discount broker sites like Fidelity, Vanguard and Schwab and do your homework.
As we move through this recession, there most likely will be changes in accounting procedure and regulations that may make a big difference in your portfolio so the popular "buy and ignore" strategy of recent years won't suffice. Remember long-term investing means just that " LONG. And the likelihood that all this will pass soon and we will be back to our loose credit, easy money standards is, well, not likely.
Take the experience of this recession of a lifetime as wisdom learned. And even though you may still be pretty upset about what has happened to your assets, you are not alone. The entire world feels your pain, so hang in there and don't let your emotions get the best of you.
- Carol Perry, a Northern Nevada resident since 1983. The opinion expressed are her own and may not reflect that of AWA Wealth Management or LPL.