Well, last week will be in the history books. Wall Street had its worst week in the 112 years that it has been in existence. Must admit I have been reading and watching excitedly not wanting to miss anything as history was being made right in front of me.
Obviously these are not the best of times so as I relish the historical implications of the times, I am also trying to understand and decipher what is going on so I can make intelligent decisions concerning personal finance and business in general.
As it stands, there is not much I can decide about or offer advice on; its too late. My investments are already way down so moving stock mutual funds into cash is dumb because I will be selling at the bottom and probably would not be able to recoup the losses for many years. On the other hand, staying in the market and actually buying more shares at the bottom seems to be the most prudent thing to do at this point and something that may pay off big in the near future.
Obviously, staying the coarse may not be something retirees can do. Their investments are what they live on and financial advisors have been preaching that you must be invested in some stocks even if you are retired because many people live much longer and need the historically better growth potential of stocks to bonds to finance their long retirement years.
I guess it all depends on how low will the market go and how long will it stay there before things start going up.
The first thing to remember is that the stock market is not the same as our economy. Just like the crash of 1929 did not cause the Great Depression, the current downward spiral of the stock market is a side show to what is happening to our economy.
We know that the stock market is unpredictable and moves sometimes on rumor or whims. Fear is a big factor in the investment world and I think a huge factor in what is happening right now. This became quite clear on Thursday when the market plunged in the last hour of trading. Why? Investors watching the market all day decided to get out of their investments so all the large mutual funds now had to sell shares at fire sale prices just to pay all the investors cashing out all at once.
I believe that the people that panicked and cashed out of their investments are done; cashing out at pennies on the dollar next week will be insane so I believe the market will stabilize around people that for all intents and purposes, have to stay the course. It may also be a time for bargain hunters who will get the best stock prices they have ever seen.
More on this history in the making later…
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