This was written during the 2008 Market Implosion (Credit scandal implosion). As a historical piece, it is interesting to read the ideas and concepts of that market mess.
That was an interesting expression I heard a financial pundit make once, about a short-lived rebound in the markets, during a severe downturn. It is true, was yesterday a recovery? I have no idea. Will it continue? Ask me tomorrow. As the Canadian Capitalist said in a very eloquent statement (which I will shamelessly steal):
If you panicked during yesterday’s sell-off, you should take a hard look at your asset allocation and see if you are taking on more risk than you can stomach. There is nothing worse than selling in a panic and locking in your losses.
Those are very true words and better than, “With great power comes great responsibility”.
Personal Experience
During Monday’s panic, I went out and bought more banks. I can’t tell you that it was an epiphany or some other thing, but I decided I would get a Dividend paying asset “on-sale”, so I went out and bought it. Was it the right move? Again, ask me in about 6 months, and I’ll tell you then.
Make an Investment Plan
If anything has been learned, you must have a financial plan, and a plan on how you want to deal with your investments so you aren’t part of the panicking masses during these market downturns. Do what you think is comfortable for you.
Let me repeat one point that I have read in Michael James’ blog and in others, that I repeated yesterday as my strategy. If you have short-term money that I need to live on or pay off debts, it should not be in equities, because I need that money not to shrink or disappear. If this is conservative, then I am conservative. All my equity investments are in funds I need in 5 years or more.
Give Blood
I am giving blood for the 11th time (I hope), I challenge my readers and fellow financial bloggers to do the same. No you don’t get a tax write-off, but you do help save lives.
Thanks for the mention. I have the same idea as Traciatim and am going to add to our kids’ RESP next week. It’s hard to tell when the bottom will be hit but it is always a good idea to buy long-term when the markets panic.
I think we had pretty close logic, only I didn’t buy banks, I bought the world, in my sons RESP.
I made the comment on wheredoesallmymoneygo.com :
“He is 3, I’m using TD E-Funds. I actually used todays drop to move my contributions (which go in to a money market fund) in to the E series Canadian Index, the E series US Index (Canadian Dollar) and the E Series International Index. Is it a smart move? Maybe not . . . I’ll know in 2009 . . .”
That is my hope. I have been singed, but not as badly as previous downturns, we shall see how well I did when I try to retire.
–C8j
I think regardless of whether the market recovers or not tommorrow your bank purchase will look like a pretty good buy in 10 years…as the old saying goes “Buy on Fear and Sell on Greed”.
MCM