Financial Fixes, Five for Tough Times
This article provide five points of focus for one when faced with unpredictable financial markets. When faced with market volatility it can be stressful to keep one's financial plans on track and these five points will come in handy help focus one's efforts.
You Should Ride the Waves, When the Surf Is Up
When there are dramatic fluctuations in the market you have the ability to buy the "dips". Basically when the stock prices are in a very volatile state the prices could be down your next paycheck when you're contributing into your 401(k) plan. What this means is that you'll be getting many more shares for the money you're putting in.
For example if you say put $500 into a stock fund for your 401(k) every month and the market is down on your payday then you'll be so happy as you're going to get more shares for your money than if the market were say up in the clouds. It's pretty much like you go shopping and find out that everything that you want is on sale. This is a long term investment so don't worry about when the market is low and you're investing, ride the waves.
Buy Low, Sell High
It is almost inherent to our natural psychological nature, we want to invest in winners. Nobody wants to be part of a loosing team. However, in reality, there are economic cycles and all stocks go up and down. Ultimately, one will have to resist always wanting to invest in the winners as you may be getting in just before a dip. If real estate and bonds have been going up and up it is likely a good time to move on.
Is real estate going to continue to increase in value? There is a possibility but its highly unlikely that we are going to see strong surges that resembles those of the pass. Most likely real estate is going to level off and stocks will be the long term investors best area to be focusing on.
Don't Run For Cover
If you're going to go through a tornado or a hurricane then that is the time to hunker down. When it comes to long term investments it's not such a good idea. If you sell you're going to miss the party later on. Stocks are something that tends to go up really rapidly when it comes to the beginning of a market recovery.
Long term investors do not throw in their chips when the markets turn sour. Once in, it is better to be part of the eventual return of the Bull market to have avoided the Bear. Back in 92-01 the S&P 500 had a 175% return on investment. All those that bailed out on their investment missed out on these heady times where it was almost like discovering free money.
Stash Your Cash
When managing your over all portfolio you don't want to keep your self cash poor and have to sell off assets to fund your basic needs. A Bear market will rarely keep growing for more than 3 years and so you should keep about the same about of cash liquid. Therefore you can have some cash to renovate your home, put a deposit down on one and send your children to school then you should stay in the liquid money market (CDs).
Stop, Look, Listen
Worry won't help you much. You need to focus on and take a thorough look at your particular situation and with the help of a trusted financial adviser create a strong financial plan. This will be the best way to get you back on your feet.
You Should Ride the Waves, When the Surf Is Up
When there are dramatic fluctuations in the market you have the ability to buy the "dips". Basically when the stock prices are in a very volatile state the prices could be down your next paycheck when you're contributing into your 401(k) plan. What this means is that you'll be getting many more shares for the money you're putting in.
For example if you say put $500 into a stock fund for your 401(k) every month and the market is down on your payday then you'll be so happy as you're going to get more shares for your money than if the market were say up in the clouds. It's pretty much like you go shopping and find out that everything that you want is on sale. This is a long term investment so don't worry about when the market is low and you're investing, ride the waves.
Buy Low, Sell High
It is almost inherent to our natural psychological nature, we want to invest in winners. Nobody wants to be part of a loosing team. However, in reality, there are economic cycles and all stocks go up and down. Ultimately, one will have to resist always wanting to invest in the winners as you may be getting in just before a dip. If real estate and bonds have been going up and up it is likely a good time to move on.
Is real estate going to continue to increase in value? There is a possibility but its highly unlikely that we are going to see strong surges that resembles those of the pass. Most likely real estate is going to level off and stocks will be the long term investors best area to be focusing on.
Don't Run For Cover
If you're going to go through a tornado or a hurricane then that is the time to hunker down. When it comes to long term investments it's not such a good idea. If you sell you're going to miss the party later on. Stocks are something that tends to go up really rapidly when it comes to the beginning of a market recovery.
Long term investors do not throw in their chips when the markets turn sour. Once in, it is better to be part of the eventual return of the Bull market to have avoided the Bear. Back in 92-01 the S&P 500 had a 175% return on investment. All those that bailed out on their investment missed out on these heady times where it was almost like discovering free money.
Stash Your Cash
When managing your over all portfolio you don't want to keep your self cash poor and have to sell off assets to fund your basic needs. A Bear market will rarely keep growing for more than 3 years and so you should keep about the same about of cash liquid. Therefore you can have some cash to renovate your home, put a deposit down on one and send your children to school then you should stay in the liquid money market (CDs).
Stop, Look, Listen
Worry won't help you much. You need to focus on and take a thorough look at your particular situation and with the help of a trusted financial adviser create a strong financial plan. This will be the best way to get you back on your feet.
About the Author:
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posted by Vittoria @ December 19, 2011
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