I have in front of me a report on the current financial situation written by a market strategist at one of the U.S. investment firms. The report is titled “Stay Calm in the Midst of Crisis.” The author makes some good points. The one that resonated the most with me is:
“Investing is easy. Staying invested isn’t – especially during a market such as this.”
It’s tough to not want to pull all of my money out of investments and put it into safer funds. But with great risk comes great reward… or so I hope. I have to remember that I don’t need my money for at least 30 years. It’s going to go through cycles like this more than once, and just staying the course makes the most sense. (I am very much wishing, however, that I hadn’t already completed my 2008 Roth IRA contributions though.)
Another issue raised in the report is whether or not we’re headed for another Great Depression. As we all know, in the Great Depression, banks failed, and clearly that’s happening here. But we also have FDIC insurance, which is why we don’t need to pull our money out of the banks. Also, during the Great Depression, unemployment was at 25% and there were no unemployment benefits or Social Security. The most interesting point, the one I think that the mainstream press misses, is that in the 1930’s, mistakes were made. The Fed raised interest rates in an effort to boost the dollar and taxes were also raised. Additionally, “Protectionist measures raised tariffs, which led to retaliation from other countries and led to a broad decline in world trade.”
Does this mean we’re safe from another Great Depression? Well, I don’t think that you can ever rule out anything, but if we do fall into such a dire economic state, the reasons will be different.
It’s hard to stay the course. It’s not easy to know that my retirement accounts are losing money like water through a sieve. But I take faith in the fact that things will recover.