CLARKONOMICS: Here we are and it’s another day, another lost dollar in the market for people who are investing for retirement.
The insecurity people feel right now is pretty ugly. There’s fresh doubt about the survival of large banks both here and abroad. This is a time that everywhere you look there is a reason to be unsettled. People are panicked out.
There was a time in 2008 when it was a panic a day, particularly every weekend when the financial markets would close and some big organization or other would be taken over or fail. Today we’re in a different situation where things that used to be shocking are now routine.
At the same time, there’s a tendency to overreact. I see that in what’s happened the last few days in the big run-up in the value of gold. Gold is shiny and physical at a time when you feel like you can’t trust institutions. I know that precious metals feel stable when stocks still feel scary.
Yet I would encourage you to remember that the greatest opportunity comes when most people are running away from investing and risk. In many cases, the safest path is one that seems most risky.
Personally, I haven’t changed anything with my 401(k). I’m well diversified, I looked at my portfolio and I believe it makes sense for this time, and I will continue to contribute each pay period through thick and thin.
Do not allow the upset of the moment to take you off your goal and take you away from long-term objectives. Yes, we could have financial ugliness in our economy for a while. It could be a long time before we get to meaningful growth again. But that doesn’t mean that we’ll never do well again.
You want to be in the game so when things do turn, you are part of the action, not sitting on the sidelines.