“Any intelligent fool can make things bigger and more complex… It takes a touch of genius – and a lot of courage to move in the opposite direction”. (E.F. Schumacher) Do you move with the herd? The real estate bubble and recession wrecked a lot of financial goals and plans. Wait, the stock market is back, stronger than ever! The real estate market is coming back too. What did you do?
The recession ended roughly four years ago, but we may not know it. Unemployment has remained high and we are slowly recovering economically. Consumer confidence dropped to a low at the time when economists indicated the recession was over. It has since improved with various ups and downs, but still not a return to normal. This is due to the high unemployment. If you are unemployed, you probably think it is a depression.
Rich or not, stabile employment trumps rich or not! I am sure that the consumers that feel confident about the economy are spending money. If you are unemployed, you are probably cutting back on your expenses. You probably did not participate in the increased values in the stock market, real estate or business. Jobs follow consumer confidence and demand!
Companies will not start hiring until they see sustained demand beyond their current capacity. Companies are driven to achieve profits and hiring new employees before you need them will impact profits. If individuals would think this way, they would make more money too. Applying these principles to areas of your life will make you more of a genius than a fool. Is it luck? No, you have to be proactive with your life to make more money.
High unemployment changed the landscape! The new college graduates have an awful time finding jobs. This is nothing new, it has been going on for a few years. There are graduates who would normally be hired into training programs who have to take anything just to find work. How can you make yourself more marketable? New college graduates need to show how they applied their skills to the real world. It may be an internship (paid or unpaid), part time work or summer jobs.
Then you market yourself using a resume, networking or creating a website. How do you show the world that you have the skills to be successful? You shout it from the rooftops! If you have started your career, there are accomplishments you want to market and you can use your resume to do it. Networking and technology can help you find people who can help you in your search. Doing nothing is not a choice!
Buying at the right time trumps any interest rate. It is the old syndrome of buying low and selling high. High interest usually depresses the home market. That is why the Federal Reserve has artificially kept the interest rates low. It is intended to encourage borrowing. There are other factors going on simultaneously with a recession. If you were one of the people who bought a home at the bottom, you should be very happy right now. If you were one of the people who bought before the real estate bubble burst, you may be underwater. 20/20 hindsight is great!
It wasn’t that long ago that the market dropped like a rock because of the real estate bubble bursting and the recession. If you got out of the stock market as many did, you missed out on the roaring bull market! Will it continue forever? Of course not, but I do not time the market anyway. Whether the market is rising or falling, there are always ways to protect yourself. It is called an asset allocation. A good asset allocation will make you seem like a genius!
Some of the companies that that are doing well are the kinds of companies Warren Buffet likes. In this case, they are defensive stocks such as healthcare, consumer staples, and utilities. Is this a trend or just another choice in the stock market? Are you a genius or a fool? I see it as a choice when putting together your asset allocation. Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance and investment horizon.
This is just reflective of a point in time similar to measuring your net worth. You calculate your net worth on the last day of the month or quarter and it indicates a value for your assets and liabilities. Your net worth may have increased or decreased. It is best to measure your progress at routine intervals to fairly assess your progress. You can look like a genius or a fool, but it is up to you to learn from each experience.
Sometimes, you are just lucky! For example, I downsized at one of the best times fifteen (15) years ago. I bought when the market was low and sold my home when the market was rising. Was it luck? No, I knew it was the time to buy, but not to sell. I kept investing in the stock market while it was going down and I am now watching it go to a new high. I am not a genius, but I am not a fool either!
Photo by: mrsdkrebs