Thursday, November 8, 2007

Don't Worry About Wall Street

“Gear up investors; we’re in for a rough ride.” “The stock market continues its dive as the subprime mortgage crisis unravels before our eyes.”

A news blurb echoed even more panic for Americans; noting that nearly 40% of the countries jobs may one day outsource overseas.

Oil continues to skyrocket on fear of shortages, terrorism, and overall turmoil in foreign lands.

Panic on Wall Street seems to be an every day phenomena as financial markets struggle to find anything to cheer about. What should we make of all this mess? Are things really as bad as they seem?

A few things you can do to survive the panic:

(1) Continue investing for the long term, avoiding high expense ratio funds
(2) Stop focusing on the bad news, if it really bothers you that much then stop reading about it
(3) Reinvent yourself

1. Financial markets will undoubtedly struggle as the credit crunch saga on Wall Street unfolds; however, the basic principles of investing remain intact: dollar cost average in low expense ratio index funds (Fidelity Spartan S&P 500 index). Look to shift some funds into foreign investments (China, Europe) as the dollar weakens, it will help offset some domestic risk. Avoid paying capital gains taxes in hopes of making a quick buck; the grass isn’t always greener on the other side. If you qualify, fully fund your Roth IRA—this is the single greatest investment vehicle for young people available.

2. Read A Random Walk Down Wall Street by Burton Malkiel if you can’t get a grasp on the principle of risk-reward and bandwagon trading. Good and bad news will come and go, but the savvy investors keep pumping money into the indexes. Psychologically, the constant bombardment of bad news may make you weary, if it does, stop paying attention. The market doesn’t need your watchful eye to correct itself.

3. Globalization is a fact of life; either embrace it and find a way to contribute, or you’re going to get passed by. Make changes in your life. Never stop learning. Read a book nobody is reading. Randomly email someone that interests you. Expose yourself to new and different environments to find out what you truly enjoy doing. Forget about failing and looking stupid, at least you made an attempt. And above all else: find yourself spiritually (for me it’s Christianity)

This is not a self help guide; rather, some simple ideas to get the ball rolling. When the dust settles, nothing is ever as bad as it seems….