Financial Armageddon!

Michael Laurance  Finance Coach

May you live in interesting times.  - Ancient Chinese Curse

Financial Armageddon!

Doom and Gloom!

Bankruptcies!

Foreclosures!

Bailouts!

Oh, my!

It seems wherever we turn today there is bad news on the financial front, and more bad news on the horizon.  Stories about financial meltdown surround us now.  On the radio. On TV.  In the newspapers and magazines. So, what are we to do?

First things first: Turn off the talk radio and turn on some classical music.

Turn off the TV, or at least turn off the shills who are screaming about what you should do this very minute.

Turn the newspaper to the comics.

Take a deep breath, and get some historical perspective on the situation.  Stop listening to the talking heads telling you to switch in and out of your investments or to follow the next hot trend.

Remember that finances are but one of the pillars of your life (albeit a very important one!).  Remember your friends and family, your health, your spiritual side are vitally important to you as well.  NOW more than ever.

Here are some incontrovertible facts about money and the markets:

• Since most stock indices were started, there have been roughly 20,000 days where stocks were traded in.
• The totality of the gains, meaning all the money made in those 20,000 plus days, are equal to the gains of the top 21 days…or said another way, all of the gains in the stock market came in the 21 best days. That is just 0.1% of all the days the stock market was open…and ten of those days were this year!!
• Likewise, the stock market would be valued double its current state if you missed the 18 worst days…and eight of those days were this year!!!  Again, that is 0.1% of all the days the stock markets have been open!
• Even the best of the professional money managers fail to beat the market most of the time. In fact, their odds of beating the market over one, five, ten and 15-year periods are no higher than a random event like flipping a coin! (Meaning that professional stock pickers who do beat the markets, and there are some, are as few as if they simply flipped a coin to determine their consistency.  Over a 15 year period, the odds of beating the market are one in 1000, roughly the same odds as a mutual fund manager doing it!!)

So, take some time, think about your long-term investment goals.  Think about what level of volatility and risk you can tolerate. If the recent stock market turmoil keeps you up at night, after you have turned off the pundits SCREAMING at you from your television, keeping all your money in stocks is not for you!

Give yourself permission to reevaluate your goals and the road you take to achieve your goals. Only once you have mapped out what you want to achieve, and what you can tolerate, should you make investment decisions.