GOOD MONEY: MARKET CRISIS? 10 THINGS YOU SHOULD DO NOW!
Printer-friendly versionGOOD MONEY: Your guide to profitable and socially responsible investing By Judith L. Seid, CFP ® October 1, 2008 (La Mesa) — The crisis on Wall Street caused by the bursting of the real-estate bubble has now lasted 13 months and has caused far more damage than analysts initially forecast. Three of the five biggest American investment banks have failed or been bought since March, and Fannie Mae and Freddie Mac, the giant mortgage companies, were effectively nationalized earlier this month. Plunging housing prices have also crimped consumer spending and slowed the overall economy, which has lost 700,000 jobs this year. Even so, investors have generally seemed hopeful that the economy would avoid a full-scale recession. Now that confidence may be fading. Monday September 15th markets opened with the news of Lehman Brothers’ filing for bankruptcy and Merrill Lynch selling to Bank of America, creating a swift sell-off in the market as fears that the crisis in the financial industry could stun the broader economy. Investors drove stocks down almost 5 percent sending the Dow Jones industrial average and Standard & Poor’s 500-stock index to their lowest levels in two years, the biggest one-day point drop since the terrorist attacks in 2001. The panic caused by the major moves in the financial sector led the prices of Treasury bills and notes to soar as investors sought safe places to park their capital. Oil prices dropped sharply on Monday, on concerns that demand for energy would shrink as economies slowed down. Not only do economists and strategists agree that the market volatility is likely to continue for some time, in addition, since this is an election year, markets are likely to remain unpredictable until after the election is decided. This isn’t a fun period for most investors and we suggest you follow these suggestions: Here are “Ten Things You should Do During a Market Crisis:” Stay Calm – Be careful not to make rash decisions due to overwhelming fear or anxiety. If changes are necessary, make them based on a diligent and rational foundation. Check on your insured deposits, like CDs – Have no more than $100k per institution, as this is all that FDIC insurance will protect. Review your overall portfolio allocation – Do you have adequate diversification and an appropriate investment mix for your stage of life and your needs for portfolio income? Take advantage of this opportunity to do tax loss selling – Consult with your trusted financial advisor to see if this is appropriate in your situation. Take advantage of this opportunity to reposition investments – A good time to review and possibly reposition you portfolio is when prices have dropped as your capital gains may be less and capital gains tax rates are still at historic lows. Continue to save and invest – Do not let short term market conditions stop you from putting aside money in your savings and investment plans. Always remember to “pay yourself first” by putting away a minimum of 10% of your income into your 401k’s, Roth-IRA’s, 403b’s, Simple-IRA’s, etc. Do long range financial planning – Make sure you know where you stand and that you have planned for how you will reach your long term financial and lifestyle goals. Evaluate your risk management – Are you adequately insured in the event of an unlikely illness or death? Do you have long term care insurance, adequate life insurance, estate planning documents in place, etc. Have an insurance and estate planning review. Analyze your portfolio to make sure your investments are aligned with your values – You know what your values are…do you know what you own in your portfolio? Be thankful for all the things in your life that are good – Focus on your strong and supportive friend & family relationships because these are more important than money. Judith L. Seid, President and founder of Blue Summit Financial Group, Inc, is a certified financial planner who has actively used Socially Responsible Investing (SRI) for her clients since 1992. She firmly believes that “We can influence corporations to change their policies by avoiding investments in irresponsible companies and by seeking investments in companies with positive practices and products.” Socially responsible investing (SRI) exists for investors looking to use the power of financial investment to create sustainable social change. For more information on Sustainable Investing, contact Judith at Blue Summit Financial Group in La Mesa, (619) 698-4330; www.BLUESUMMITINVEST.com Securities through Cambridge Investment Research, Inc. (CIR) a Broker/Dealer – Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Blue Summit Financial Group, Inc. is not a subsidiary or affiliate of CIR. Printer-friendly version