Don’t Worry About The Falling Markets

by Mike Holman

What, me worry?  Yes, of course I’m worried – it’s tough to watch the markets fall and hear about how the American credit market is seized up without wondering if we edging too close to the end of civilization as we know it.  I was quite surprised when the “Great American Bailout” vote didn’t pass on Monday although given that Bush seemed to be one of the main spokespersons in favour of the bailout, maybe I shouldn’t have been.  Couldn’t they have found someone/anyone more palatable (Palinable?) to the American public for that role?

Anyways, the markets are in turmoil and as Mr. Cheap pointed out yesterday, now is not the time to panic with your equities.  He also pointed out that maybe you shouldn’t watch the markets at all.  If you are having trouble dealing with these crazy markets then take his advice.  If you really want to worry about something then worry about something important – for most people who aren’t planning to retire anytime soon – your career is your biggest asset! As long as you have your job, then you can pay the bills, mortgage and put food on your table which is the top priority.  That’s right – your retirement savings could disappear overnight and your day to day life won’t change a bit.  Ok, if that happened you might want to do some retirement planning and maybe kick up the savings a bit but your lifestyle will only change if you want it to.  If you lose your job and can’t find something equivalent then you are screwed – it will be impossible to keep up with the same lifestyle.  In that case, you will have to cut back somewhere – either your expenses or your early retirement dreams or both.

I’m at a point where I have a half decent sized retirement account and I would probably weep uncontrollably for days if it disappeared…however, the reality is that given the choice between losing my career or losing my retirement savings – I would choose to keep the career.

Bottom line is – focus your worries on the things that are most important – your career is far more important than your retirement savings so when the markets are tanking – just enjoy your commute to work.

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{ 15 comments… read them below or add one }

1 Patrick

LOL – Palinable. I love it.

I agree with you. Stocks go up and down. If your investment horizon is several years down the road, there is no reason to panic. It’s better to buy when the market is down anyway (though you never can be sure when the market is at its lowest).

I’m already following this advice. I’m currently getting an industry recognized certification in my field, which will help my marketability and potentially my salary, should anything go wrong with my current job. Great article.

2 Nurseb911

I’m too busy BUYING to worry….deals, deals, DEALS!!

In all seriousness though the media just loves to sensationalize all of this. If you’re a avid investor none of the recent news is anything new – we’ve been dealing with this for over a year now. Stick to your plan, acknowledge risk and I think most investors will get through this period just fine.

3 Mr. Cheap

Brad: It is quite interesting that everyone is talking about issues that have been bouncing around the blogosphere for some time. I was walking through the halls at the university and passed two students and one of them was saying “now is a bad time to get into stocks”. I wanted to stop and discuss it with him, but he probably wouldn’t have appreciated some strange guy joining their conversation…

4 Four Pillars

Patrick – I really think they should have made Tina Fey the main spokesperson for the bailout plan.

Brad – why do I have the image of you pawning your girlfriend’s jewelry to buy more stocks? 🙂

Cheap – don’t forget you have phd power – assuming they were undergrads – they should listen to you (or at least pretend to).

5 nobleea

I’d have to agree with nurseb911. I’m really not worried at all. And it’s a bit disconcerting to see a lot of bloggers start to panic (or even mention ‘don’t panic’). Because they’ve been touting the idea of constantly investing regardless of what the market does. Don’t change a thing. Most of us are in the late 20’s to late 30’s/early 40’s range. Time IS on our side.
It is NOT different this time. If it’s a recession or a depression coming, who knows. I don’t think any of us are smart enough to time the market properly.

I think the world has become more polarized and sensationalist. Stocks will always go up! Stocks are going to be worthless soon! Real estate always goes up! Real estate’s going to be worthless soon! Cash is king! Real inflation is 20%!

6 Gates VP

Quoted for Truth: …for most people who arent planning to retire anytime soon – your career is your biggest asset!

In fact, I’ll one-up this. We 20 & 30-somethings are likely to live until we’re 90 (barring catastrophe). Unless we squirrel away lots of money and aggressively diversify our income streams, most of us are going to work until we’re 75 (not 65). (Saving 15 years of income in 50 years of work is far more realistic than saving 25 years of income in 40 years of work)

I think it’s safe to say that we can’t all diversify our income streams and live off the labour of others. Somebody has to do something at some point 🙂

And if you’re doing “something”, you might as well get paid well for it.

7 Mr. Cheap

Gates: Good point. I nominate all of you to work while I live off your labour! Heck, I don’t even mind if you all get paid well for doing it…

8 Four Pillars

Nobleea – given the media’s tendency to induce panic at every opportunity – I think it is worthwhile for bloggers to send out the “stay calm” message. There were a couple of commenters on yesterday’s post who said they were going to move part of their monthly contributions into cash – this makes no sense to me at all.

Gates – I really don’t think most people are going to work to 75. Between social programs/pensions and the ability to cut back (everyone has it), not many people will work past 65.

You’re right about the career development though – good for you for making positive moves in that direction.

9 Mr. Cheap

Mike: Moving to cash doesn’t make any sense to me either. There’s a sale on right now.

10 Al

Just for a bit of contrast, I sold some investments. I anticipated the spike in the market after the bailout was announced (and sold then) followed by the drop soon afterwards. I plan on buying the same stocks back sometime in November. There’s too much mythology around the month of October for the next 30 days to go well.

Mr. Cheap,

The central banks may be pumping out cash, but all they’re doing is replacing part of the banks write downs. I call deflation.

11 Nizam

I wish I could be in North America now.Since early 2007 I started to sell my equities and bought mutual funds instead.Earlier rejections on the 700 Bill USD was just an excuse i.e. to boost Bush’s image.Markets in East Asia have learned the spiral as early as 1998.Asians did just the same in 1998.

12 Simple Life

It is true, there is nothing to worry about when your investment goal is long term like at least 2 years.

I too been buying on the way down. I started to buying when the SP500 lost 20%, although it is down 29%. However, i keep telling myself: sp500 will recover and back to the peak. That’s for sure.

Live long and be prosperous; be patience.

13 Mr. Cheap

Simple Life: “like at least 2 years”? Do you really consider 2 years long term? My understanding is that the generally accepted view of long term stock investing is 10+ years.

14 Canadian Money

For what it is worth, I took a close look at the SP500 Index today (currently down ~40%). It looks to me like it has more downside before the bottom is reached.

An easy way to buy a little Bear Market insurance is purchase HXD.TO shares. If the market continues downward they will go up in price to offset long positions that are going down. This ETF is trading near $27 per share today.

The ETF that “shorts” the SP500 index is called SH. It is tradomg at near $70 per share.

15 Canadian Money

Correction…SP500 is only down by 29 % at this time.

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