In spite of current rumors, the recession that American is facing at the moment will eventually end. This recession isn’t the first time that the American economy has taken a hit, and it most likely won’t be the last. Regardless, the truth is that times are financially tough, and many families and businesses alike have suffered from the waning economy, and unfortunately, many suffering in a downturned economy tend to make decisions based on emotion and fear rather than facts and analysis.
It’s hard to stay positive regarding finances during this rough recession, but it’s always important to not give way to fear and panic. Unfortunately, most investors haven’t taken this advice to heart, and have only made a bad situation worse. This is all a part of what’s called a self-fulfilling prophecy. People are afraid the market will tank and, due to this fear, they pull all their investments out causing the market to drop only further. This isn’t the exact same situation as the Great Depression of the 1930’s, but it does draw some very interesting parallels. We have to learn from the lessons of the past, and below is a list of five things people should never do during poor economic times:
Don’t React to The News or Media
The media, first and foremost, is about grabbing attention, and you’re not going to hear good news. Good news doesn’t sell. Everyone wants to talk about how terrible things are. It’s catchier and will grab headlines. Don’t make market decisions based on late-breaking news, as this is a bad strategy based off emotion. If an investment is proving to be a bad one, then you should look at your options, but don’t sell and buy at the whim of the media. That’s a quick road to losing your shirt. If you’re worried about one of your investments, speak with some of the professionals out there, like Cavalry Portfolio Services, before you do anything rash.
Don’t Stop Investing
Many have stopped investing because the economy is in a lull which has, in effect, caused the exact thing everyone was afraid of – a further market failure. People are saving everything and they’re not investing. Though on an individual level this makes sense, overall it hurts the world economy and prolongs our inability to bounce back from times like these. If you’re worried about shaky prospects, invest your money in good and solid companies with excellent track records. These types of industries are always the best investments in bad times. Their stocks may take a dip, but they’re always going to bounce back. You want to strike a balance with your investments, and always diversify so even if one industry fails, your portfolio won’t be ruined.
Don’t Obsess Over Your Investments
You should never check your stocks minute-by-minute. This is a similar principal to media reaction. The market is like a living thing; it has good days and bad days. If you believe in a stock, stick with it. You don’t want to look every chance you get at what’s happening with the market. This is the way an amateur invests, and, though it may prove effective once in a while, it’s the worst type of strategy as it will cause you to make rash decisions based off emotion.
Don’t Rely On The Government
If you’re waiting around for a relief package or financial assistance from the government, don’t hold your breath. The government is having a hard enough time balancing its own budget. The average investor and citizen is the least of its concerns right now, and the government is the last institution you want financial help or advice from. You also shouldn’t hold out hope that Social Security will cover you once you retire. According to a recent story on ABC News, Medicare and Social Security are going to run out much sooner than previously anticipated. The government will no longer have the funds necessary to support those using the programs by 2037. These programs were put in place after the depression of the 30’s as a stopgap measure to provide a safety net during retirement. The problem is that nothing’s been done to overhaul the system since then, and, unless something’s done soon, the money that everyone’s putting in won’t be there by the time we retire.
Don’t Stop Investing In Your 401(k)
Always find room in your budget, even if it is tight, to place money in your 401(k). Social Security, in its current form, will not be there when you retire. If you’re having a hard time finding the money to get by, before you stop investing in your 401(k), you should instead, reevaluate the way you’re spending your money. Sometimes making simple cuts to your spending or small changes to your standard of living can deliver the desired results.
If you want to get though this without losing everything, take some advice from previous generations and the lessons that they’ve taught us. In many ways, the crash that occurred on October 29th, 1929, created a proving ground for many people. We’ve studied and learned so much, yet, when the economy tanked again, we instinctively made many of the same mistakes. If we don’t learn from past financial failures, then we’re doomed to repeat them. Don’t let your retirement or savings go to the wayside simply because the economy is bad. Even when America’s bank account is shaky, yours doesn’t have to be.