Tuesday, December 9, 2008

Plan for the Worst

I started PFStock in August 2006 with the hope that younger readers and bloggers would look to me for advice. In one of my first posts on PFStock, I mentioned that I was subjected to downsizing twice in the past decade. I feel as if I've dodged a bullet, as my company had a significant layoff earlier this year, but I was somehow spared.

However, I am pessimistic about the current financial climate. The events of the past few months leading up to now have convinced me that an economic recovery will not happen soon. While many people talk about hope in future, hope alone is not enough to change the current economic malaise.

Over the years, I've learned not to get too overconfident. This year, confidence in the financial markets has certainly been shaken. Market volatility usually doesn't worry me because I have a diversified portfolio. But this time, I am worried! I wrote about irrational exuberance earlier this year. And while I predicted that the economy would be headed into a recession, I underestimated the severity of the downturn.

A down market usually presents a new set of opportunities for investors. But now, I am having trouble seeing where the opportunities lie. Indeed it is the time to plan for the worst.

I advise readers to carefully consider and to reconsider their investments. As I've said before, don't keep all of your money in once place. And it is not the time to buy into risky or exotic investments. While I believe that things will eventually turn around, any significant improvement may be far off. It is very possible that the economy may remain lethargic for an extended time. In other words, we may be in this for the long haul.

DC

2 comments:

Smarty said...

Happy Holidays!! I hope things will get better soon.

pfstock said...

Hi Smarty: Thanks for your comment. Like I said in my post, hope alone will not make the economy better. I wasn't very specific when I said that any significant recovery will not happen soon. What I meant is that due to the severity of the downturn, it will be YEARS before we can expect a complete recovery. I wish that there was better news, but unfortunately there isn't.