The first quarter of 2009 is almost over and unless we see a dramatic recovery in the stock market soon, it will go down as the worst quarter in the history of the stock market. This will almost certainly be reflected in those quarter-end statements you receive from your stockbroker or 401(k) provider.
How did we get ourselves in this mess and what are we going to do now?
Although it is convenient to point to the mortgage crisis, deregulation, and the blatant disregard for risk management from both corporations and public officials as the cause of our investing problems, the downfall of prudent personal financial management began long, long ago.
If I were to isolate an incident and time period that got us into this mess in the first place, I would have to go back far beyond the mortgage crisis, all the way back to 1982, the year that company-sponsored 401(k) plans began to sprout up. Coincidently, this also happened to be the same year that a red hot bull market arose from a deep slumber to generate returns over the next 17 years almost double its long term average.
Through that unprecedented era, millions of Americans who participated in these company plans came to the false conclusion that the solution to a secure retirement was to save and invest a little money in investments that produced fantastically high returns.
Slowly – ever so slowly, investors are coming to the realization that that the solution to a secure retirement might necessitate a slightly different strategy: Save and invest a lot of money in investments that are likely to produce far lower returns.
In short, this new era of investing will challenge us like never before to stop tuning in to business news networks and start tuning in to our own lives; how we experience personal fulfillment and how we manage our financial resources (i.e., spend our money) to achieve this fulfillment. Instead of spending all our energy trying to predict the final bottom of this cruel bear market, now is the time to start developing a personal financial plan to prepare for better days ahead.
The Coffeehouse Investor is all about taking personal responsibility for your financial future. Don’t let this opportunity of a bear market go to waste. Because of current valuations, the stock market is likely to generate decent returns in the coming decade.
Do your part to make the next ten years one of opportunity captured. It doesn’t start by the market bottoming out. It starts by you creating an awareness of your saving (or spending) targets to reach your goal, and then plugging these numbers into your planning software.
It starts by you taking charge of, and responsibility for, your financial future.