Читать книгу Financial Security For Dummies - Eric Tyson - Страница 35

We’ve been on a whirlwind tour of modern American economic and financial market history. Knowing what problems have occurred in the past and how things turned out after the fact can better help you to wisely navigate future similar problems and turmoil.

Emotionally, of course, it’s somewhat easy to look back in hindsight at all of the problematic events we’ve reviewed in this chapter. So, let’s recognize that we’re all human and have emotions that can get the best of us and cause us to do the wrong things at the wrong times (such as panic and sell stocks after a major decline) when we’re in the midst of a storm.

Everyone makes mistakes and has reasons for why they do what they do. Consider this amazing story about a southern California woman during the 2008 financial crisis as reported in an article in the Orange County Register:

“Police went to Whole Foods where managers told them an elderly customer came in a few days earlier, hysterical after she realized she had mistakenly returned the box of crackers with her life savings inside. Frightened by the government takeover of several banks, the Lake Forest woman, whose identity was not released, had decided to take her money out of the bank and hide it in her home.”

For sure, plenty of folks were worried about the safety of their money with the stock and real estate markets getting pummeled during the 2008 financial crisis. But folks worrying about the safety of keeping their money in the bank reflected irrational fear. If the FDIC government system backing up our banking system failed to protect bank account depositors, holding onto paper money, also issued by the U.S. federal government, wouldn’t do you any good either.

Most folks can see the silliness and danger of keeping cash in a cracker box in your home. Cash kept in your home could be stolen, forgotten, or destroyed in a fire. Hearing stories like this can lull us into thinking that well, we would never do something so ill advised, yet many people make decisions and take actions that are nearly certain to lead to suboptimal or even terrible outcomes.

Consider some other detrimental financial moves I have seen people make during economic and financial market calamities:

 Selling stocks at greatly reduced/depressed prices: When stocks are falling in value fast and the daily news is filled with gloomy headlines about job losses and other economic problems, I’ve seen plenty of otherwise intelligent folks dump their stocks and buy bonds or simply sit on cash in a money market or bank account. Typically, during such episodes, bonds are in high demand (and thus at elevated prices) and offering reduced yields. Now, don’t get me wrong — I understand the emotions behind this. No one enjoys feeling like they’re going down with a sinking ship or part of the losing team. But selling stocks low and buying bonds high is the opposite of how smart investors make money. Otherwise, sound investments that are beaten down in price offer value. That’s why smart long-term investors buy, not sell, stocks after they’ve fallen, and you should as well.

 Following supposed prognosticators who claim to have predicted all these bad things that have recently happened: Fibbing and misrepresentation are rampant on social media platforms. And the mainstream media should really do a much better job vetting people they are giving airtime to. Sure, sometimes a pundit gets something right in the short term, but what about their longer-term track record and how accurate or not that was?

 Heeding misinformation and uninformed people on social media platforms and blogs: For example, in response to a 2008 news report about housing prices dropping significantly from the prior year, consider this online posting, “Even if there were mortgages to be had, people have learned a valuable lesson from this housing bubble. No one in their right mind is buying now unless they’re looking at at least a 50 percent discount … from today’s prices!” If you were already stressed about challenging economic times, reading such gibberish would just make you more anxious. The reality was that there were plenty of mortgages being done then, and real estate prices weren’t going to (and didn’t) fall 50 percent from those depressed levels.

 Immersing yourself in excessive and negative short-term news: When a crisis is unfolding, of course you’re going to want to keep up with what’s happening. The problem, however, comes from the fact that news (and opinions) come at us 24/7 now and so much of it is geared toward sensationalism and raising your anxieties to keep you tuned in. The “news” almost always focuses on the very short term and fails to provide a long-term perspective. The more you consume, the more stressed and depressed you are likely to become and the more likely you are to make emotionally based moves that are detrimental to your long-term interests.

 Listening to politicians. Even when there isn’t a crisis or major economic problem, many politicians make things sound dire, especially when the other party is in power/control or we’re coming out of an event for which they blame the other side. In the fall of 2011, more than two years into the recovery from the severe recession/financial crisis of 2008, President Obama said in a broadcast White House roundtable discussion with journalists, “Obviously we’re going through the worst financial crisis and recession since the Great Depression.” I had to do a double take to make sure that this was not recorded back in 2009 early in the president’s first year in office! While the economic environment in the United States in late 2011 was far from strong and robust, we had been in recovery and enjoying modest economic growth the prior two years. Millions of jobs had come back, and corporate profits and stock prices were bouncing back. Also, the recessions the United States suffered in the mid-1970s and early 1980s featured even higher unemployment rates and much, much higher inflation and interest rates (10+ percent) than the 2008 downturn.

Here are some key lessons to take away from this chapter and keep in mind as you manage your money in the years ahead:

 Hold onto your long-term investments like stocks and real estate during downturns. It’s impossible to know how long and deep a downturn will be, and history has shown that prices can bounce back quickly, so you’re not going to be able to time buying back well if you try to exit and miss a part of the decline.

 Read and review news and other sources that help you maintain balance and a long-term perspective. This likely means limiting your diet of daily news and choosing your resources carefully.

 Consider using extra cash to take advantage of depressed investing prices to buy more at favorable prices.

 Don’t beat yourself up for past mistakes. Everyone makes mistakes. Wise people learn from and grow from their mistakes.