There are a number of realities to life that become even more evident during tough times. I found this list in a neat little publication by Ron Blue and Jeremy White, CPA called Surviving Financial Meltdown. It is not a new book, but I do think these principles apply in good and tough times.
Here is their list:
1. Economies and stock markets go up and down.
- Do plan for and expect downturns.
- Don't sell low and buy high based on emotion, or fret about periodic declines that show up on your statements.
2. The only certainty is uncertainty.
- Do expect change and look for the opportunities it can bring.
- Don't worry, avoid risks because of fear, or attempt to control events.
3. The conventional wisdom is usually wrong.
- Do seek wisdom from God as you pray and study Scripture; seek godly counsel from others.
- Don't look for "insider secrets" to success; don't avoid counsel offered by knowledgeable friends and professionals.
4. No one investment works every time.
- Do diversify to spread out risk.
- Don't stop investing.
5. Correct principles work correctly throughout time.
- Do remain calm even in financial storms.
- Don't let fear or lack of confidence keep you from sticking to solid financial plans.
I would add that under item number 4, above, that is why we tend to mix our version of "buy and hold" with more active, highly uncorrelated investment strategies (such as trend following) within the same client's portfolios. It is one further layer of diversification!
What do you think? Should there be additional dos and don'ts? Or do you have an contrary opinion on one of the five economic realities listed?