Financial Age Regression

by golbguru on February 28, 2009

Think about this.

Stocks tumbled Friday on worries about the government taking a bigger chunk of Citigroup and a bleak reading on the economy, again touching 12-year lows. (source)

As Wall Street slides towards a 12-year low, it’s almost like getting back 12 years on your financial clock - and a great opportunity to get to all the investing that you have been planning and procrastinating and planning and procrastinating … but never really doing anything about it.

This especially applies to people like me, who, just a few years ago, procrastinated much without actively investing, and thought that they missed the bus on making big bucks in the stock market.

The cash percentage in this portfolio will give you an idea of what I am talking about.

I now have a chance to invest some of that cash 12 years ago - with valuable diversification lessons from the past couple of years. :)

Well… what happens if we hit 24-year lows?

For people like me, that would be an unprecedented opportunity - assuming you believe that markets will have to go up sometime in the future. The time-frame over which this happens is not really predictable, but one can’t stay eternally pessimistic, you know.

Way forward: I am thinking dollar cost averaging and some key ETFs (having a healthy volume).

I have had doubts about dollar cost averaging in the past; but given the current situation, I have sort of started appreciating the value of investing that way - small steps at a time. Of course, the gains are small and slow, but so are the consequences of failure. I bet the slow and steady are surviving this crisis a lot better than the fast and furious.

ETFs (by their very nature) mitigate the risk of losing a bunch of money on individual company bankruptcies, but they have their own pitfalls - read this to understand how ETFs have the potential to put you in a hole if you are not careful.

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1 Robert 02.28.09 at 2:55 am

Ha ha! Wow! When I tell people that many are still in denial about what is happening, they look at me like I’m crazy. And then I hit a blog like yours (don’t worry, you aren’t alone) and I feel reassured about my point of view.

There is no escaping at least another 50% loss in all assets except cash. Well, perhaps we should pray that is how this turns out. Attempting to inflate out of this is still a possibility, but also is true suicide.

Search for ‘the market ticker’ and read through the past few months of facts on the ground. Ignore the rants and you will find yourself better prepared for what is coming.

Best wishes.

2 Golbguru 02.28.09 at 10:06 am

Robert, I understand what you mean - but there is an implicit assumption in what I am doing - I won’t be investing more than I can afford to lose. :)

Plus, I will be doing it over a span of time and that will dollar cost average the losses down.

Cash is working well at the moment but I am not sure about what’s going to happen to the dollar after the market starts flooding with trillions of dollars when the credit crunch eases a bit.

3 Stephanie PTY 03.02.09 at 1:05 pm

I love this thinking! If I invest now, it’s the same as if I had invested when I was 10 years old!. If stocks hit a 24 year loan, it will be like going back through time to before I was born and investing. Hot!

4 Bill McCollam 03.16.09 at 4:08 pm

I like the site, and agree generally with the sentiments. Generally it’s a good time to buy when most are looking for the exits. I was reading a few other blogs of people that have hit their ‘capitulation’ point. Feels like a good time to buy

5 Beyond Paycheck to Paycheck 03.26.09 at 5:31 am

This is a very interesting way to look at the current crisis. While clearly there are divergent views of where we go from here (just looking at the comments above, not to mention the endless parade of talking heads on TV), you can’t dispute our relative location vs. the past. I for one, agree, with your sentiments that if you are investing for the long-term, today presents an exciting opportunity. Emphasis: long-term.

6 kim @ Travel HQR 05.21.09 at 10:57 pm

Nice article there,
I agree with your article and find them really informative.
Can’t wait to read more of your insights.

7 kim 05.21.09 at 11:02 pm

Nice article there,
I agree with your article and find them really informative.
Can’t wait to read more of your insights. - kim of Travel HQR

8 mlgreen8753 09.16.09 at 8:25 pm

Robert Kiyosaki says more millionaires are created during time of recession than any other time. It’s all about knowing when to sit and when to act. I think now is the time to make investments that others are running from because if everyone was buying it is too late. I am looking at a company called Mentor Capital (MNTR), which I learned about after reading a convincing article on Breast Cancer Investing. I think now is the time to move so I am doing my due diligence before going in.

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