Turbulent times

September 25th, 2008 Dividend Pirate Posted in Economy |

Tumultuous times indeed. Stock markets globally are down, house values are down, unemployment is high, gas prices are high and negative news are everywhere. This is the first bear market that I am personally going through.

Turbulent times as well as great times to learn. I learned that banks can fail, a stock can go from 70 to 0 in a matter of months, house values can decrease by 30%, storied investment banks with top level MBA grads don’t always make the right decisions, with high risk can come high losses and the government can bail out companies using tax payer dollars !!! Wow.

Are you feeling emotionally angry, frustrated and drained with the current crisis? Are you scared to even look at your portfolio or 401K account because of the massive declines that have happened recently? Do you feel that you were better off NOT investing and should have rather kept your money in a bank account or better yet under your mattress? It’s normal to feel the way you are feeling. I am going through the same emotions. I learned an important lesson in investing psychology. Our tolerance for risk is not stable. We tend to believe we are risk takers in up markets and very risk averse in down markets.

It’s okay to feel the fear and acknowledge the pain. It’s NOT okay, however, to react to the fear and take wrong decisions. Calm down. Take a step back, take a deep breath and think long term. Things will get better.

I will leave the readers with these few words by Abraham Lincoln, “This too shall pass.” How chastening in the hour of pride! How consoling in the depths of affliction!