The market is crashing! The sky is falling! Cats are living with dogs! It’s the end of the world as we know it!OK, maybe it’s not that bad. Maybe it is if you see article titles such as Fed Cuts Rates To Stop Bloodbath. A little hyperbole, no? From what I understand foreign markets are dropping over fears of a US recession. Our market is dropping because the foreign markets are dropping because they fear our markets will drop. Make sense?
I’ll admit I don’t fully understand the scope of what is happening in the market right now (haven’t taken enough economics classes yet). Here’s what I do seem to understand:
- When you invest in stocks you have to invest for the long haul. The market will go up. The market will go down. But over time the market does well. As scary as the market may seem right now it will recover.
- When everyone says something is great to invest in then it’s time to worry. Remember the tech bubble? You could throw a dart at a list of tech stocks and make money off of them. Then the tech bubble crashed. Stocks plummeted and the strong tech stocks stayed afloat. Remember housing? A few years ago you could buy a house and watch it’s value go up thousands, maybe hundreds of thousands, of dollars. Now banks are hurting; people are losing their homes; and it’s tough to get a loan. How about foreign markets? I kept hearing how you have to invest more in foreign markets since the dollar was weak and foreign markets are growing and that’s where the money is. What happened? Yeah it looks like right now foreign markets might not be the place to invest heavily in either. What to do? a) Have a diversified investing plan and stick to it. b) Use dollar cost averaging to help ride out the bumps in up and down markets. c) Don’t get lulled in by what everyone is saying is the hot thing.
- My online savings rate will get lower. The Fed had an emergency rate cut today to slow the market and help ease worries. That’s all well and good but when the Fed cuts rates the next thing that happens is ING Direct cuts my savings and CD rates. Nothing much I can do here except shop around for better rates. I’ll probably keep my accounts where they are. The rates can’t get much lower before banks have to pay us to take money.
The news headlines are scary. We should be concerned but we shouldn’t panic. There may even be some silver lining to this:
- It could be a good time to buy a house. Prices will probably fall more and mortgages will be less expensive.
- If you have credit card debt your rate might be going down. Now could be a good time to make extra credit card payments and get rid of debt.
- If you haven’t opened up an IRA or signed up for your company’s 401(k) now could be a good time to start. You haven’t lost anything and since the market’s already down you could be investing for a nice upturn.
What do you think of all of this? Any advice? Let me know!
Related post: My 401(k) Is Killing Me, I’ll Never Retire!
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{ 5 comments… read them below or add one }
Excellent post!
I couldn’t have said it better – and I tried!
You can read my thoughts on the subject here:
U.S. in Recession – Another Great Depression Coming Soon!
OK, that’s enough of my shameless plug. I have to say that I’ve been lurking on your blog for a number of weeks and really like it! Keep up the good work!
As for the market plunge, I’m in it for the long haul and view this as one of the best after Christmas sales I’ve seen in a long time.
Thanks for stepping out of the shadows and posting a comment! Glad to hear you enjoy the posts.
Perhaps all of this market plunge will make some stocks more affordable. I’m no stock expert by any means but I plan to keep an eye out for anything interesting.
Nice site by the way!
I hear you – things are looking alright though if you keep your job.
your money will stay the same, but prices for investments will drop. So keep your job, and keep investing! 
That’s my plan Hank! Or better yet, my plan is to make my job better so I can invest more!
I have strong feeling that the market can still recover. We can see the bull run.
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