Gawker has a good bit of media criticism posted today on how the big business magazines, in relatively recent issues, touted stock in AIG, Merrill, and Lehman Brothers. (Nationalized, fire sale, and bankruptcy, in case you haven't been following the news.)
This goes to reinforce the idea that it's not so smart to read magazines for stock tips. I am really glad that the business magazine I work for doesn't tout stocks, because the whole idea is irresponsible. The typical small investor like you and me, trying to grow her nest egg, shouldn't even be buying individual stocks, or really, even mutual funds. The smart long term investment is low cost index funds--period.
On the other hand, I've heard from friends and acquaintances that they are panicked by what's going on and want to get out of the market altogether. This is understandable, but it's also the wrong idea. I'm not even going to check my performance for the next few weeks, although I am reallocating investments to make sure I'm diversified.
The secret to successful wealth building is to live beneath your means, save, diversify, buy, and hold. You definitely want a solid rainy day fund in CDs and FDIC-insured savings accounts (AKA cash), but if your retirement is more than 20 years off, it should be a small proportion of your total assets. You have to stay in the game or you'll miss the comeback.
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3 comments:
What if there isn't a comeback? Where is the rule that everything has to come back? Nice thinking. America isn't creating wealth anymore, and once the Asians, Europeans, and Arabs pull the plug, it's lights out baby. Think about it. You would be better having your money in your matress.
1) I own a percentage of international stocks as well.But thanks for the reminder--I'll be buying more of them going forward.
2) Let's say the US economy totally tanks. What's the point of having a lot of useless green paper in your mattress?
The chinese are killing their own babies with bad milk. Do you really want to invest in that?
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