Oct 10 2008
From Bad to Worse
Wow! We keep asking ourselves, “Can it get any worse?”, and it appears that the answer to that is YES.
As I write this today at 10:00 am the Dow Jones is down over 200 points again and there doesn’t seem to be anything the government or business can do about it. The one consolation is that we will have a three day weekend for the markets with a banking holiday on Monday. It seems that progress can be made over days when the markets can’t react immediately.
I know that we will get through this as we have gotten through every other challenge our economy has faced over its history but when you are in it, it can really hurt. I know that we have all lost money and that it will take time to recover what is gone but there are a few things you can do right now to protect yourself.
First, you should already be in cash in your 401k plans. The market may fall still further and there will continue to be a lot of volatility until this credit crisis gets resolved. If you are concerned that you will miss some good days ahead know that you will also be missing some of the bad ones as well.
Next, you should look at some of the new investment vehicles out there that offer what are called “living benefits”. These plans, offered by insurance companies, guarantee a future income stream with a minimum return of 6 or 7% on your investment that you cannot outlive, even if your account value drops to zero. There are a number of good companies that offer these products and I would be happy to discuss them with you if you like.
If you are participating in plans where you are contributing on a monthly basis, do not stop. Even if you have moved the bulk of your 401k to cash your future investments should be invested in the market since you are buying shares at better and better prices. This will help when the market recovers as these shares that you bought on sale will recover faster.
Don’t pull your money out of the bank. No one has lost a dime yet and with the insured amounts lifted to $250,000 (there is even a proposal on the table to make this unlimited) your money is safe. The worst thing we could do to insure a depression would be for us to make it even harder for banks to make loans because there is less capital on deposit.
Talk to a professional about your money. I hear too many people say they don’t want to do anything for fear of doing the wrong thing. Doing nothing, however, may be the wrong thing. There are ways to protect your investments and provide future growth, so open those statements and then find out what you can do.
I know this is a scary time, but be assured that we will get through this and life will get better.
Let me know if I can help you.
Marc
